The Indian Budget 2024 has brought forth few changes impacting homebuyers, property investors, and developers. This blog explores how these new rules could reshape the property landscape.

What is the Union Budget?

The Union Budget is an annual financial statement presented by the government, outlining its revenue and expenditure plans for the upcoming fiscal year. It details the government’s allocation of funds across various sectors, including infrastructure, education, healthcare, and defence, and introduces tax policies and reforms aimed at stimulating economic growth and development. The budget is a crucial tool for setting national priorities, managing public resources, and guiding the economy’s direction. It impacts individuals, businesses, and industries, shaping the economic landscape of the country.

The Budget 2024 has significantly altered the real estate landscape, with diverse impacts across various market segments. Long-term property investors will be facing reduced returns due to the withdrawal of indexation benefits, while first-time homebuyers might benefit from more stable prices. Developers, particularly those in the affordable housing sector, may experience growth despite increased project costs. Additionally, urban rental markets are set to see increased demand, and financial institutions may adjust their loan strategies. Here’s a breakdown of the changes and their implications.

Key Changes in Budget 2024

·    Long-Term Capital Gains (LTCG) Tax Reduction: The budget reduces the LTCG tax from 20% to 12.5% and removed the indexation benefits. This move is intended to attract more investments into the real estate sector. Additionally, a rollover benefit allows capital gains of up to ₹1 crore to be exempt from tax if reinvested in another property, which should encourage property transactions.

Homebuyers have two options regarding LTCG tax: they can either pay 20% LTCG tax with the indexation benefit on the sale of property acquired before July 23, 2024, or opt to pay 12.5% LTCG tax without the indexation benefit, choosing the option that results in the lower tax liability. For properties purchased post July 23, 2024, LTCG will be calculated at 12.5% rate.

·    Residential Rental Income Taxed as ‘Income from House Property’ According to the 2024 Union Budget update, all rental income from residential properties for individual taxpayers will now be classified under ‘Income from House Property’ (IHP) rather than ‘Income from Business or Profession.’ The government noted that some taxpayers have been incorrectly reporting rental income from residential properties under ‘Profits and Gains of Business or Profession’ (PGBP) to reduce their tax liability.

To address this intentional tax evasion, the government plans to amend the Act to specify that rental income from letting out a residential property, or part of it, should be reported under IHP instead. This change will take effect from April 1, 2025, and will apply to the assessment year 2025-26 and subsequent years.

·    Pradhan Mantri Awas Yojana (PMAY) Urban Scheme: A significant allocation of ₹10 lakh crore is directed toward the PMAY Urban Scheme, aiming to construct 3 crore houses. This focus on urban housing is expected to drive growth in affordable housing.

·    Infrastructure Status and Capex Allocation: While the demand for granting infrastructure status to the real estate sector remains unmet, the budget does increase the capital expenditure (Capex) allocation to ₹11.11 lakh crore. This increase will support large-scale infrastructure projects like multimodal logistic parks, industrial corridors, and smart cities, all of which have indirect benefits for real estate.

·    Sustainability Initiatives: The budget emphasizes green growth by encouraging investments in solar and renewable energy, as well as water and solid waste management. It also promotes EV infrastructure, offering subsidies and incentives to boost green real estate development.

·    Urban Development: The budget introduces initiatives like the digitization of land records and GIS mapping, which are expected to enhance transparency and efficiency in the real estate market.

Conclusion

While the regulatory changes may introduce complexities, they also offer a chance for strategic planning and informed decision-making. For homebuyers, this means a more supportive environment to achieve their dreams of owning a home. For investors, it presents a landscape with potential for smart investments and long-term gains. Ultimately, the budget’s adjustments reflect a commitment to balancing growth with affordability, fostering a more inclusive and dynamic real estate market. As we navigate these changes, embracing the evolving dynamics with a proactive approach will be key to unlocking the full benefits of this promising new era in real estate.

With increasing infrastructure projects, improved connectivity, and government initiatives aimed at regional growth, Northeast India is transforming into a dynamic real estate market. Cities like Guwahati and Shillong are witnessing a surge in both residential and commercial developments, driven by rising urbanisation and economic activities. Investors are drawn to the region’s potential for high returns, as property values continue to appreciate in response to the expanding local economy and enhanced infrastructure.

At Achyut Group, we specialise in helping our clients navigate the latest budget rules impacting real estate. Our expert team offers clear guidance on how new regulations and updated subsidy schemes affect your decisions. Our ongoing residential and commercial projects are in development with the current shifts in mind and how our clients can benefit from affordable housing policies and financial incentives. Trust us to translate complex budget updates into actionable insights and guide you through our premium properties, ensuring you invest with confidence and clarity.