65% home buyers expected to default on their installments: ICC
- Developers are worried that default by home buyers in their installments can exacerbate the cash crunch in the industry
- Besides, sales and launches of new projects are also expected to get impacted badly due to covid-19
While the construction activities have completely halted because of the lockdown, it will take months for developers to resume it even after lockdown is lifted. Another problem that looms large over the realty sector is homebuyers defaulting on their installments.
According to the Indian Chamber of Commerce (ICC), an industry body, “the real estate sector already in a slump since last year is presently experiencing almost 65 percent payment default from customers paying the installments linked to construction.”
Developers are worried that default by home buyers in their installments can exacerbate the cash crunch in the industry. “The precise dent of the damage that the COVID 19 pandemic will cast upon the real estate sector is hard to grasp, but one thing is for certain that it will lead the entire industry cash strapped,” said Santosh Agarwal, chief finance officer, Alpha Corp. Development Pvt. Ltd, an NCR based real estate developer
Besides, sales and launches of new projects are also expected to get impacted badly due to covid-19.
In its statement, the ICC quoted a report by Anarock Property Consultant saying, “residential sales, which in 2019 stood at approximately 2.61 lakh units across top seven cities, may now range between 1.70 lakh and 1.96 lakh units. New launches may also witness a 25-30 percent decline during the same period to anywhere between 1.66 lakh to1.78 lakh units.”
Most developers will focus and use existing funds on completing the ongoing projects, instead of launching new ones. “Since our focus is to complete the current projects in time the fiscal onus shall shift towards ongoing project causing a deferment or delay in the launch of new projects. For the current year, the entire industry shall go into a recovery mode, strategically finding out ways to come out of the current financial and liquidity crisis,” said Agarwal.
As far as property prices are concerned, ICC sees a hike in the property prices due to raw material shortage. “China, although being the epicenter of Corona virus happens to be the biggest supplier to the Indian real estate industry. The present crisis could lead to a shortage of raw materials critical to construction and might face escalation in prices in days to come,” ICC added in its statement.
In order to help real estate industry, ICC suggested the state governments to consider measures including waiving the municipal taxes for at least one quarter, relaxation in penalty related to tax and other dues. Also, given the lockdown, scarcity of labour, raw material, and technical support and so on ICC recommended that 6 months of construction grace should be granted by the respective Real Estate Regulatory Authority (RERA) in different states to the developer for the delivery of under-construction projects.
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First Published:13 Apr 2020, 09:20 PM IST
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