The Confederation of Real Estate Developers Association of India (CREDAI) on Monday in an open letter to Prime Minister Narendra Modi sought immediate measures to revive the real estate sector.
“In this distressful situation arising out of the COVID-19 calamity, we in the real estate sector seek immediate relief for our survival,” the real estate developer’s body, which represent over 20,000 developers, said in the letter, adding that liquidity crunch, stagnant demand and cartelisation of the raw material are major impediments for the industry.
The industry body has pitched for additional institutional funding, waiver of penal interest and customer-centric tax treatment of real estate, among others.
Stating that the current situation is much worse than the 2008 global financial crisis, CREDAI said, “a one-time restructuring scheme as was permitted by RBI in 2008 may be quickly instituted by all lending institutions.” It added that since real estate was already reeling under a cyclical downturn before coronavirus (COVID-19), debt restructuring needs to be allowed for all accounts which were standard as on December 31, 2019.
It added that appropriate directions should be issued to all Banks and NBFCs to institute a scheme to permit additional credit equal to 20% of the existing real estate project related advances at the MCLR with no additional security and without the classification of the project as NPA.
The industry body said for the survival of the real estate industry, it is absolutely critical that the stagnant demand for housing is revived and further boosted. For this, it has recommended that the government should reduce the maximum rate of interest on new home loans to 5% by subsidizing the interest component of EMIs for next five years.
In addition, the limit of Principal deduction on housing loan under Section 80C should be increased to 2.5 lakhs and there should be no capital gains for residential properties held for a period of longer than one year.
“The economic uncertainty and job insecurity at the moment would not allow purchase of residential property at this time. A scheme whereby a homebuyer would need to pay only margin money with no EMI for 24 months will address this insecurity. Hence, RBI may allow HFCs a 24 months subvention scheme to homebuyers from developers. This 24 months’ subvention will be adjusted by extending the loan tenure by 24 months with subvention amount recovered in the last 2 months,” it said.
It also reiterated its demand for controlling sudden increase in raw material prices by cement and steel manufacturers.