Indian Finance Minister Piyush Goyal: AFP
Indian Commerce and Industry Minister Piyush Goyal. Photo: AFP

India’s Covid-19 lockdown has placed the country’s struggling real estate industry between a rock and a hard place. Industry players are struggling to finish ongoing projects due to supply chain disruptions and the flight of workers to their hometowns, and are also saddled with a huge inventory of unsold properties.

They were expecting the government to offer a stimulus package for the sector, but a recent statement by Commerce Minister Piyush Goyal has dashed their hopes. In a recent webinar organized by the National Real Estate Development Council, the minister advised real estate developers to start selling unsold property at low prices, since waiting for the market to improve would be futile.

Addressing the builders, Goyal said, “Unless you reduce your rates, you are stuck with material. You can choose to be stuck with your material and default in the bank till the material goes away. Or you can choose to get rid of whatever you bought at high prices, look at it as a bad decision or an unfortunate situation and move forward.” He also pointed out that those who have sold and paid off their bank loans have been able to survive the economic downturn.

The minister opined that the property market isn’t going to improve anytime soon. “If any of you here feel that the government will be able to finance in such a way that you can hold longer and wait for the market to improve, the market is not improving in a hurry,” says Goyal, “Things are seriously stressed, and your best bet is [to] sell.”

But real estate bodies such as the National Real Estate Development Council and the Confederation of Real Estate Developers’ Associations of India earlier said they had limited room to slash property prices as they were already low and that labor and raw material costs were expected to rise after the lockdown.

However the minister’s statement was endorsed by Uday Kotak, a prominent banker and president of the Confederation of Indian Industries. He said the real estate industry must clear its inventory. If the land was bought at a high price in the past, that is not relevant today, he added.

Kotak also pointed out that any decision to cut prices will bring home-buyers back into the market. “If the prices drop, people who have not bought homes for decades will do so.”

In April, Deepak Parekh, who heads India largest mortgage lender, Housing Development Finance Corporation, said that real estate prices could correct by as much as 20% in the near future. The National Real Estate Development Council had estimated a correction of 10-15%.

The financial crunch in the market, people’s low incomes, and general economic uncertainty have forced people to keep investments to a minimum. Changes in consumer behavior have affected the sentiment in the real estate sector, which is India’s second-largest employer after agriculture.