As Commerce and Industry Minister Piyush Goyal urged builders to sell their properties at realistic prices and not look to the government for more concessions — though, he said, some were in the offing — an upset builders’ lobby has urged for serious deliberations to tackle the gargantuan issue facing the sector.

“This is no game,” said a Mumbai-based developer. “Covid has ensured that debt levels of most developers will reach to an all-time high. The crisis is also going to have a huge, negative impact on real estate prices. How can the Minister be so ungracious at this time and ask us to sell anyhow?”

Developers have been battling a massive hit from the real estate market, roiling their investments in land and housing projects.

A report by KPMG and real estate body Naredco had estimated that the realty sector would incur losses of ₹1 lakh crore with a short-term impact of 6-12 months on account of Covid-19 and the subsequent lockdown, and had sought a $200-billion package from the government to help fuel demand.

Naredco President Niranjan Hiranandani had told reporters through a video conference that chemotherapy was needed to tackle the cancer in the economy, and that a Crocin tablet would not help.

Jones Lang LaSalle’s April report has estimated that India’s unsold inventory stands at ₹3.7 lakh crore. The report noted that while unsold inventory increased from 4,42,228 units in the fourth quarter of 2019 to 4,55,351 units in the first quarter of 2020, Mumbai has surpassed Delhi-NCR with the maximum quantum as well as value of unsold inventory.

Already under stress

Hakim Lakdawala, Group Promoter, Goodwill Developers said the real estate industry is one of the biggest employment-generating sectors of the country, apart from making a considerable contribution to the GDP.

“The announcement (Goyal) to reduce property rates is only going to add to the pressure that the sector is already reeling under with high taxes, cost of production and ready reckoner rates. We hope that government and authorities help us re-initiate our construction activities so that the industry can return to normalcy by Diwali.”

Mani Rangarajan, Group COO of realty sites Housing.com, Makaan.com and PropTiger.com said, “Given that residential home sales declined 11 per cent in FY19-20 in Tier-I cities compared to the prior year, there is a need to stimulate demand, which will necessitate government intervention. These include moves such as one-time loan restructuring, control over raw material price escalations, input tax credits, and reduction in GST rates.”

Price conundrum

Noting the price differential between ready-to-move and under construction projects, Rangarajan said it is largely dependent on market dynamics. “While buyers have shown a tendency to prefer ready-to-move in homes, there is not enough supply to meet demand. Moreover, property prices in many of the Tier-I cities have not increased significantly over the last few years,” he added.

Ashok Gupta, CMD, Ajnara India, said the focus should be on developing and completing projects that are ongoing. “To execute it and keep a control over prices, developers need government support,” he said.

Shishir Baijal, CMD, Knight Frank India, said developers were already dealing with mounting concerns over unsold inventory and liquidity with many struggling to maintain their margins.

While the Minister’s suggestion is valid, Baijal said it may not be the most viable one, since the crux of the problem lies in dwindling demand that the sector has been experiencing for the last few years. The main solution, he added, would be to create stable, long-term demand by providing adequate boost to economic growth.

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