Union minister of commerce and industry Piyush Goyal came down heavily on real estate developers on Wednesday, telling them that many continue to hold on to high-priced inventory despite several reminders.
Goyal said builders have no choice but to construct and sell projects at reduced and realistic prices, without waiting for the market to improve.
“…You have to complete your projects before you sell because buyers will not buy under-construction projects. In my life, I wouldn’t buy an under-construction flat from anybody. Tons and tons of builders have taken customers for a ride. You will have to complete your projects, bring partners, get investors. But unless you complete your construction, sell at realistic prices, there is no other choice,” Goyal told top developers in a video conference meeting organized by National Real Estate Development Council (Naredco), an industry body.
He said the government is trying to offer some concession in ready reckoner rates, also known as the circle rate, but urged developers to sell anyhow.
“..You can choose to be stuck with your material (inventory), then default with the banks or you can choose to sell it even if you have bought it at high prices and move forward,” Goyal said. “If any one of you feel that government will be able to finance in such a way that you can hold longer and wait for the market to improve—because market is not improving in a hurry —Your best bet is to sell and those who have sold and got rid of their bank loans, have survived this downturn,” Goyal added.
Those who are saddled with bad loans, who kept holding on to their price, have suffered, he said.
The real estate sector was further hit by the covid-19 outbreak and the lockdowns, with sales getting deeply impacted and concerns over liquidity.
In April, Deepak Parekh, chairman of Housing Development Finance Corp. Ltd (HDFC) told developers that liquidity will be key for companies to survive in the post covid-19 world, where valuation models will undergo drastic changes.
Parekh had suggested a three-pronged approach for the real estate sector, where the Reserve Bank of India (RBI) offers a one-time restructuring of loans, state governments waive stamp duty for a limited period, and developers cut prices, selling inventory quickly even at a lower price and completing operational projects rather than launching new ones.
The government recently allowed six-month extension in completion timelines for real estate projects and extended the credit linked subsidy scheme (CLSS) for middle-income group by one more year, until March, 2021.