Real Estate staring at 65% Payment defaults
The Indian real estate industry, with its current worth of around US$ 12 billion, ranks second in the world in terms of generating employment and contributes to about 5% of GDP. The recent lockdown due to COVID-19 is predicted to have catastrophic effect on already troubled Real Estate Sector. As per a report, residential sales, which in 2019 stood at approximately 2.61 lakh units in these markets, 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 -1.78 lakh units. The real estate sector is presently experiencing almost 65 percent payment default from customers paying the installments linked to construction, as per Indian Chamber of Commerce (ICC). International Trade restrictions at present have halted the supply of raw materials essential to the RE Sector. Construction supply from China such as steel and many more, dominates India RE Market. Resulting to present withdrawal of such supplies due to Border Sealing between India with neighbouring countries can be a good opportunity for Indian manufacturers to enter and expand in the domestic market and spread across the International Markets. To facilitate this opportunity of expansion of Indian market, the Government should restructure the tax component of such supplies. This would encourage the manufacturing sector in the domestic& International market to grow along with it would curtail the dependence of the Indian RE Sector on China. The Commercial Spaces hired to the Retail & Hospitality Sector are closed due to the lockdown with practically no earnings. In Case of Shopping Malls additional expenses are being incurred such as food and sanitization provided to the manpower associated with the grocery sections which are open at present. Such businesses are only incurring expenses at present with no business to justify. ICC recommends Interest free Loan EMI moratorium for 6 months to be provided as a relief to this extensive manpower driven industry to survive this difficult time. This will in turn prove helpful in protecting employment of the large manpower associated. In many cases, the workers are still at construction sites. It may be a good idea to keep them engaged in some activity with strict sanitization protocols. Finally, a weaker rupee may also revive demand among non-resident Indians, ICC feels. However, Real Estate sector desperately needs a bailout package on an urgent basis.
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