The real estate body Naredco has estimated that the sector would incur losses of Rs 1 lakh crore on account of COVID-19 and the subsequent lockdown and sought a $200-billion package from the government to kick-start the economy.
It also demanded that the ban on construction sites be lifted and provisions of the insolvency law should be suspended for at least six months to prevent the 'wholesale takeover' of Indian companies.
"This is probably the worst recession I have seen in my 40 years of career. There is real demand erosion that has taken place," Naredco President Niranjan Hiranandani told reporters through a video conference.
"We have cancer in the economy. We need chemotherapy. Crocin tablet will not help," he said.
He also said that property prices may fall by 10-15 percent and there could be lay-offs and salary cuts in the absence of any relief package.
The sector seeks an urgent infusion of nearly $200 billion which can be pumped into the market in a staggered manner to retrieve the business cycle without incurring further economic loss. The industry seeks working capital to ensure that the Indian economy doesn’t tank, business organisations don’t default and saddle banks with NPAs, as also cause job losses, he said.
He also sought a 50 percent cut in the GST rate for a period of six months for all the sectors.
Hiranandani pointed out that global investors are waiting for Indian stocks to fall in value, to take over these listed companies at throwaway prices. “Hence in lieu of protecting the Indian companies, suspension of NCLT law for at least 6 months is imperative to salvage capital erosion,” he said.
He feared that good Indian companies will be acquired by foreign firms at a cheaper valuation through bankruptcy proceedings. "We need to protect our companies, banks and NBFCs," he noted.
The real estate body stressed the need for a roll-over as was done in 2007-08, pointing out that the present situation was far worse and definitely warranted both, the roll-over as also the availability of low-cost credit, if the Indian economy was to survive the crisis.
“Deficit financing, if needed, can be implemented. The situation is bleak; we need to ensure that we come out of this not just alive, but also with a vibrant, functional economy,” he said.
The revival story post the pandemic would largely be driven by the need-based customers, and the ‘affordable housing’ segment should be first off the starter’s block, he told reporters.
“I don’t think the high-end market will be as prominent as the affordable housing segment as that is the segment where the government has been giving interest subvention giving GST at 1 percent and also giving loans up to 90 percent,” he said.
The challenge that real estate would face was whether they wanted to work in the high-end segment or affordable segment. “It is like the automobile industry; India sells million-plus Maruti cars vis-à-vis a few thousand luxury cars. It is the same in real estate, the Maruti car segment – affordable housing – has much larger demand, and real estate business will have to adapt to the changing circumstances,” he said.
On the possible fall in prices after the pandemic, he said price-points would come down as there would be some ‘desperate to sell’, but this would again depend upon location and type/ segment of individual projects.
“It is not prices, we need a vibrant economy. The success of any business will depend upon this. Industries across India, including real estate, will be driven by demand rather than price correction,” he said.
He also said commercial realty may bounce back over a period of six months to a year, and this will obviously have an impact on the residential segment.
Speaking at the conference, Naredco Vice-Chairman Parveen Jain said the construction work should be allowed at the sites where workers have stayed put and not moved to their villages.
Jain demanded that the government should send advisories to all regulatory authorities under RERA to extend the timeline of completing projects by one year. The timeline for other compliances with RERA should also be extended.
The vice-chairman demanded that states should provide a moratorium on different payments to be made to development authorities.