A Budget 2023 provision imposes a Rs 10-crore cap on the reinvestment of capital gains from the sale of housing property from April 1
DMart’s Radhakrishna Damani closing India’s perhaps largest housing deal, Godrej Properties buying Raj Kapoor’s iconic Chembur Bungalow, and DLF announcing sell-out of 1,137 luxury apartments in just 3 days — these recent developments are showing a significant jump in the luxury real estate demand in India. Though experts said the surge in demand for luxury housing is an indication of people looking for a lifestyle that mirrors their achievements and ambitions, it is also coming close on the heels of a Budget 2023 provision that will be implemented from April 1.
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What Is the Budget 2023 Provision on Real Estate?
Finance Minister Nirmala Sitharaman in her Budget Speech 2023 on February 1 announced, “For better targetting of tax concessions and exemptions, I propose to cap deductions from capital gains on investment in residential house under Section 54 and 54F to Rs 10 crore.”
Shabala Shinde, partner (tax) at Grant Thornton Bharat, said, “Currently, deduction is available to individuals and HUFs without any monetary limit from capital gains arising on transfer of long-term capital asset if such capital gains or net consideration is reinvested in new residential property within a period of one year before or two years (three years if property is constructed) after the date of transfer. The Budget 2023 proposes to limit this deduction to Rs 10 crore. Hence, any capital gains in excess of INR 10 crores will now be subject to capital gains tax.”
What Is the Implication of this Provision on Housing Demand?
The provision imposes a Rs 10-crore cap on the reinvestment of capital gains from the sale of housing property from April 1.
Maneet Pal Singh, partner at I.P. Pasricha & Co, said, “This will impact the HNIs who enjoys the benefit of deduction u/s 54 / 54F claiming deduction of more than 10 crores and will be a boon for the revenue as it will help in targeting of exemptions claimed by the assessee.”
Grant Thornton Bharat’s Shinde said the amendments will impact HNIs as the rollover benefit of long-term capital gains is proposed to be capped at Rs 10 crore and capital gains/ net consideration in excess of this limit (ie Rs 10 crore) will suffer capital gains tax at 23.92 per cent.
Luxury Realty Demand Outlook This Year: What Experts Said
Shinde said “While this (rules from April 1) may have some impact on the demand for luxury homes, there are other aspects as well, which will be relevant. For instance, after COVID-19, there is a preference for a safe and spacious home with lavish amenities. This has been one of the major contributors to the surge in demand for the luxury home segment.”
Vivek Singhal, CEO of Smartworld Developers, said, “The surge in demand for luxury housing is a clear indication that people are looking for a lifestyle that mirrors their achievements and ambitions. In today’s market, discerning homeowners are looking for properties that offer generous living spaces, natural illumination, and outdoor areas for relaxation and leisure activities.”
He added that the HNI and NRI segments, who are unaffected by economic variables such as interest rate hikes, and largely benefitting by the dollar-rupee differential are also driving the demand for high-end homes. Also, millennials’ growing purchasing power and higher disposable income is further stimulating the demand for lavish living.
Aman Nagar, JMD of Paras Buildtech, said, “Luxury product has a niche target audience and the market trend has been very dynamic. As per consumer behaviour, there has been an exponential rise in demand in the luxury segment as the next generation of homebuyers are now looking for integrated gated communities that deliver on an assortment of modern amenities.”
He added that statistics show that the NRI demographic is investing heavily in the luxury real estate sector, which promises double-digit returns in the coming years. “This will also contribute to the upward trajectory of real estate for the year 2023.”
In February, DMart founder Radhakishan Damani’s family members and associates have bought as many as 28 housing units worth Rs 1,238 crore in Mumbai. It is perhaps the biggest property deal in India.
In the same month, real estate developer Godrej Properties Ltd acquired Raj Kapoor’s Bungalow in Chembur to develop a premium residential project. Last week, realty major DLF Ltd also announced that it has sold 1,137 luxury apartments, priced Rs 7 crore and above, for over Rs 8,000 crore within 3 days, in its housing project in Gurugram.
