Shares of real estate developers came under selling pressure in trade on Thursday a day after Commerce Minister Piyush Goyal dampened hopes of support measures for real estate companies and advised them to cut prices and offload inventory instead of waiting for the market to recover. The real estate sector which was already under stress due to lack of liquidity caused by the shadow banking crisis in the aftermath of default by IL&FS has been hit very hard by the outbreak of COVID-19 pandemic.
Gauge of real estate shares on the National Stock Exchange - Nifty realty index declined as much as 2.31 per cent with eight out of 10 shares tarding lower.
"The market will not recover in a hurry. Things are seriously stressed and your best bet is to sell," Mr Goyal told developers.
"Those who have sold should leverage less and get rid of bank loans and survive the downturn. Those who are saddled with loans and holding on to prices have suffered," he warned.
The National Real Estate Development Council had sought $200 billion in reliefs to help the industry weather the impact from the coronavirus pandemic. Analysts said the liquidity crunch and unsold inventories in the sector could potentially lead to defaults on loans and worsen the $120 bad debt with banks.
Mr Goyal said the government was trying to bring about some concessions in the ready reckoner rate - the minimum price at which a property must be registered - to help buyers and the industry but advised builders to sell even if that did not happen.
"You can be stuck with inventory and default or get rid of whatever you quoted at high prices. Consider it a bad decision and move ahead," he advised.
So far, the government has allowed a six-month extension in completion timelines for real estate projects and extended a credit link subsidy scheme for the middle income group by a year until March 2021.
Godrej Properties was top loser among the real estate developer, the stock fell 5 per cent to 788. Prestige Estates, Brigade Enterprises, Sunteck Realty, Phoenix Mills, Indiabulls Real Estate, DLF and Sobha Developers were also among the losers.
