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“Prices should and will come down,” said Parekh. “I believe Naredco’s (National Real Estate Development Council) estimate is between 10-15%. One must be prepared for even 20%.”
That price crash, however, presents an excellent buying opportunity, for potential home buyers who have a job security or cash flow. He said real estate is an immensely important asset class, and the value of global real estate was more than the value of all the stocks and bonds combined.
The residential real estate market has been struggling more nearly five years now and the last three has been particularly tough due to the impact of demonetization, implementation of RERA and the introduction of GST.
On top of that builders were overleveraged and oversupply has flooded the market leaving the developers with huge unsold inventory as buyers stayed away from purchases often due to high price.
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Parekh said the time is appropriate for builders to sell off their unsold stock even at a low price. “You need liquidity and get rid of it,” he suggested members of Naredco and Credai. Future launches are also expected to come down as demand has evaporated from the market, he cautioned. “Focus on completing projects rather than launching new ones.”
He also advised realtors to use moratorium as the last resort as it would mean pushing the can down the road. At a time when equity funding in the segment has been reduced to a trickle in the last few years, he insisted on getting it “at whatever price as that provides a higher cushion.”
Since the sector has been thrown into a new challenge, where conserving cash and reducing expense is imminent, he also advised builders to be stingy on expenses. “Take home less money, keep the money in the company. Cut your home-running expenses.”