The coronavirus lockdown has hit real estate sector and brought all construction activities to a halt in India. Subsequently, the already sluggish real estate sector is experiencing defaults in payments from homebuyers.
According to Indian Chamber of Commerce (ICC), the realty sector is witnessing 65 per cent payment defaults from customers for under-construction projects.
"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.
This is because many customers were requesting developers to allow them to delay their payments as they were facing liquidity crunch due to lockdown, Shah added.
The Indian real estate sector, which is currently worth $12 billion and contributes about five per cent to the GDP, has witnessed a drastic drop in sales due to the lockdown.
Shah also projected that payment defaults in the realty sector will continue next month too.
Shah suggested the government to implement Delayed Payment Act in real estate sector to diffuse the crisis.
"The move will discourage payment default by customers, thus enabling developers to charge penal interest on delayed payment beyond the agreed period of time," he added.
The ICC director also pointed out the uncertainty over the completion of residential projects, mainly due to scarcity of labour and raw materials. He asserted that he does not see any growth in the sector before August.
"Given the current circumstances, we don't see the sector reviving before August. The real estate sector desperately needs a bailout package on an urgent basis," Shah added.
ICC has also suggested a waiver of municipal taxes for at least one quarter. Besides, organisations which are not able to clear up taxes or bills should not be penalised and given around 3-6 months for repayment of the same, ICC adds.
The premier body of business and industry in Eastern and North-Eastern India also recommended interest-free loan EMI moratorium for six months to be provided as a relief to the realty sector amid pandemic.