Realtors' apex body CREDAI on Wednesday said the construction work has come to a standstill while sales have been hit following the outbreak of coronavirus, and demanded the government to provide a three-month moratorium on debt repayment, additional liquidity and more time to complete ongoing real estate projects.
The industry body has written a letter to Minister for Housing and Urban Affairs Hardeep Singh Puri seeking a bail out package.
Giving details about the impact of coronavirus scare on Indian real estate, CREDAI said sales velocity and the receivables have been hit drastically leading to default/delay in fulfilling financial commitments (interest & principal).
Property buyers are skipping instalments payable on their purchases of real estate, it said, adding that rental income of retail properties has been affected due to closure of malls and multiplexes.
"The construction work has come to a standstill and delays in procurement/delivery of construction material (imported and indigenous) as well as the labour disruptions are bound to cause delay in completion of ongoing projects," CREDAI said.
The association said that the governments world over have stepped in to provide immediate relief to businesses and industry to enable them to deal with the severity of the COVID 19 shock and urged Indian government to announce measures to help real estate developers.
CREDAI recommended various steps that need to be taken immediately for cushioning the shock of COVID 19 to the Indian real estate sector.
The association said the government should provide relief in interest and principal repayments falling due over the next three months
in case of real estate projects.
It also requested that penal interest charged by banks and other financial institutions should be suspended for a period of one year or until such time as it takes for the pandemic to abate.
"The construction work on real estate projects has come to a standstill and the material is also not available currently. Hence, the cost of construction of real estate projects has gone up across the board and is expected to rise further when the work resumes.
"On the other hand, the cash flows are impacted due to the buyers not being able to fulfil their commitments on account of the financial market meltdown. Hence, the only way to meet the enhancement in the cost of projects due to COVID 19 is by way of additional funds from Banks and Financial Institutions," the letter said.
CREDAI sought additional funds for real estate projects so as to meet the enhanced costs, on the same terms and conditions as existing loans and without additional collaterals.
The association said that Section 6 of RERA law provides that registration granted under section 5 may be extended by the Authority on an application made by the promoter due to force majeure. The force majeure conditions envisaged under the Act include war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the regular development of the real estate project.
"COVID 19 does get covered under any other calamity caused by nature. Hence, it is humbly requested to please issue an advisory to the Real Estate Regulatory Authorities in all the states to please extend the time of completion of real estate projects as well as exempt the penal charges under RERA for a period of one year," CREDAI said.
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