Real estate in India post-COVID: Developers resisting price cut despite pressure
Key Highlights
Real estate developers agree on need to reduce prices.
Ready Reckoner Rate a legal hurdle.Mumbai: “Reducing real estate prices is a theoretical proposition as the I-T department will penalise you”, says Niranjan Hiranandani, President, ASSOCHAM & Co-Founder & Managing Director, Hiranandani Group. In a discussion with Tamanna Inamdar on India Development Debate, Hiranandani agreed developers should reduce their prices especially if they have borrowed money.
Commerce & Industry Minister Piyush Goyal in a webinar yesterday said that markets will not recover in a hurry and that the best bet is to sell. He said developers will be stuck with their inventory if they don’t reduce rates.
Hiranandani believes Piyush Goyal made a sensible statement as he said it was directed towards developers who have taken huge loans from banks and are holding on to assets in the hope of price recovery. The real estate sector was reeling under huge stress even before COVID-19 struck the economy. Markets were already at a bottom and the last five years saw the sector getting further impacted by reforms like Demonetisation, GST & RERA, said Vinod Rohira, MD & CEO – Commercial Business, K Raheja Corp. “Real estate prices were down 10-15% between Demonetisation & before COVID-19”, said Niranjan Hiranandani.
Anuj Puri, Chairman, ANAROCK Property Consultants believes big developers are unlikely to bring down prices due to their big holding capacity and that we may not see a generic price drop. Hiranandani said the government will either have to change the ready reckoner rate or change the law. The Ready Reckoner Rate is the standard value of an immovable property assessed and regulated by the respective state government in which the property is established. This prevents the developer from selling below the set rate and attracts huge I-T penalty in case of violation. Developers agree that markets will determine the price in the next couple of months and that the sector will boom if the economy booms.
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