The Reserve Bank of India (RBI) has once again decided to maintain the repo rate at 6.5%, marking a continued focus on stability amid global uncertainties. The consistent interest rate environment will make home loans more affordable for buyers, while the government’s decision to offer tax-payers a choice to pay 20% long term capital gains tax with indexation benefits or 12.5% sans indexation on the sale of property acquired before 23rd July 2024 is likely to increase demand. This combination is expected to drive sales, construction activity, and overall economic growth.
“The RBI’s decision to keep repo rates unchanged at 6.5% for ninth consecutive time aligns well with yesterday’s announcement on indexation benefits. It sets a positive tone for the housing industry. Maintaining interest rates offers consistency in borrowing costs, which will prompt more aspiring homebuyers to consider taking the plunge – and thus drive demand in the housing market. With interest rates staying steady, EMIs will remain manageable for current and potential homeowners, potentially leading to increased home sales – particularly in the price-sensitive affordable segment.
Yesterday’s announcement regarding indexation brings tax advantages for property investors, as it permits adjustments to the purchase price keeping inflation in mind, reducing capital gains tax burdens upon property sale. This provision increases the appeal of real estate investments, which will spur demand and capital flow into the housing sector. These combined actions bolster investor trust and position real estate as an avenue for long-term wealth growth,” said Anuj Puri, Chairman – ANAROCK Group.
Housing sales across the top seven cities have been phenomenal in the last few quarters, even though prices are rising steadily. As per ANAROCK Research, housing sales touched nearly 2.51 lakh units across the top 7 cities in the first half of 2024 – the highest half-yearly sales in the last decade. Meanwhile, average residential prices across the top 7 cities have seen a significant jump in the last one year – ranging between 13-39% in Q2 2024 when compared to Q2 2023.
Benefits for Homebuyers
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Affordability: Stable interest rates make home loans more affordable, encouraging potential buyers to enter the market. -
Increased Choice: The option to choose between the old and new tax regimes provides flexibility to property owners, potentially reducing their tax burden. -
Price Stabilization: While property prices have been on the rise, the combination of stable interest rates and tax benefits could help stabilize prices and make housing more accessible. -
Increased Investment: The real estate sector is likely to attract more investment due to the improved outlook.
“Interestingly, stability in interest rates coupled with the recent announcement to rationalize stamp duty charges along with concessions for women homebuyers bodes well for real estate sector especially residential segment. Strong visibility in financing charges should help homebuyers and developers alike in the upcoming festive season.
Moreover, partial withdrawal of the applicability of the revised LTCG tax arising out of sale of land & buildings retrospectively provides elbowroom to effect housing sales with minimal tax outgo. This is likely to buoy investors’ & homeowners’ sentiment and thus the real estate sector at large throughout 2024,” said Vimal Nadar, Senior Director & Head, Research at Colliers India.
A steady monetary policy for the past one and half years has ensured stability in the real estate sector, boosting demand for all asset classes.
First Published: Aug 08 2024 | 11:21 AM IST
