Owing to the lockdown that has brought almost all economic activities to a standstill, the already sluggish real estate sector is experiencing 65 per cent payment defaults from customers for underconstruction projects, says Indian Chamber of Commerce (ICC)
The Indian real estate sector, which is currently worth USD 12 billion and contributing about five per cent to the GDP, has witnessed a drastic drop in sales with no clarity on revival due to social quarantining, it said.
"The real estate sector, which is already in a slump since last year, is presently experiencing almost 65 per cent payment default from customers paying the installments linked to construction," ICC Director Rajneesh Shah said in a release.
He said due to the lockdown, many customers have been requesting developers to allow them to delay their payments as homebuyers are also faced with liquidity challenges due to COVID-19 related issues.
"We believe the payment defaults by customers will increase in the next few months," he added.
Singh further said the Chamber has made certain recommendations to the government wherein it has suggested that the Delayed Payment Act prevalent in the MSME sector should be extended to the real estate industry.
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"This will discourage payment default by customers, thus enabling developers to charge penal interest on delayed payment beyond agreed period of time," he added.
He noted that since there is uncertainty over the completion and handover of residential projects, mainly due to scarcity of labour and raw material, ICC has sought extension of six months from housing regulatory authority RERA for delivery of such projects.
"Given the current circumstances, we don't see the sector reviving before August. Real estate sector desperately needs a bailout package on an urgent basis," Singh added.
Meanwhile, ICC has also suggested waiver of municipal taxes for at least one quarter and that organisations which are not able to clear up taxes or bills should not be penalised and given around 3-6 months' time for repayment of the same.
ICC has further recommendedinterest free loan EMI moratorium for six monthsto 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," he added. PTI PSK
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