Piyush Goyal said builders must choose from either being stuck with the material and default on loan repayments, or selling at current prices to get rid of the inventory built at high prices.
Commerce Minister Piyush Goyal recently forewarned real estate developers to start selling idle lying property at low prices, since waiting for the market to improve would be futile. Piyush Goyal, in a conversation with builders, advised not to think that the government will be able to provide financial support in such a way that they could hold and wait for the market to improve. “The market is not going to improve in a hurry,” he said, adding that the best bet is to sell the inventory at a reduced price. He added that those who have sold and got rid of their bank loans have survived this economic downturn. In a widely circulated video, the Commerce Minister also said that unless the builders cut rates, they will be stuck with the inventory.
Laying out the available options, Piyush Goyal said builders must choose from either being stuck with the material and default on loan repayments, or selling at current prices to get rid of the inventory built at high prices. Piyush Goyal’s statement got a quick endorsement from new CII president Uday Kotak, who said that he completely agrees with the minister and the real estate industry must clear its inventory. If the land has been bought at a high price in the past, it is irrelevant today, Uday Kotak, Managing Director, Kotak Mahindra Bank, added.
Apart from making a considerable contribution to India’s GDP, the real estate industry is also one of the biggest employment generating sectors of the country. However, the sector has been under stress for a long time now. The disruption led by the coronavirus pandemic has brought a bloodbath in the real estate sector. The financial crunch in the market, low income of people, and the instability in the economy have forced people to cut their investment appetite and accumulate more liquidity with themselves. The changed consumer behaviour has hurt the sentiment in the real estate sector.
Meanwhile, selling inventory at a reduced price may give a short-term boost, but it may add to the worries of the sector as well. “Union Minister Piyush Goyal’s advice to developers to reduce property rates is only going to add to the pressure that the sector is already reeling under with high taxes, cost of production and ready reckoner rates,” Hakim Lakdawala, Group Promoter, Goodwill Developers, told Financial Express Online. Some in the industry hope that the government and authorities would help the realty industry to re-initiate construction activity so that it can return to normalcy by Diwali and the demand too shall pick up post the festive season, Hakim Lakdawala added.