Realty Prices Will Crash Up To 20%: Deepak Parekh

New Delhi: The real estate prices in the county will crash up to 20 percent amid the ongoing corona pandemic and lockdown, said HDFC Chairman Deepak Parekh.

While addressing real estate developers today in a webinar organized by real estate industry body NREDCO, Parekh said, “Prices of real estate have to come down, and will come down…. I believe Naredco’s estimate is around 10-15 percent. One must be prepared for even 20 percent.” 

Parekh highlighted the fact that the real estate industry has been going through a prolonged slump due to various reasons like economic stress, high leverage, tight liquidity. Even non-performing assets (NPAs) have been going up in construction finance.

This correction in prices would be a good opportunity for thse buyers who have job security or cash flows. 

“The value of global real estate was more than the value of all the stocks and bonds combined," he said.

Parekh warned the developers in the country against high leverage. "It acts like a double-edged sword. In good times, it amplifies your profits. In bad times, it destroys you. Be careful of the perils of leverage,” he said.

Parekh advised the real estate developers to use the moratorium as the last option. Moratorium would be just deferring the problem for now. 

Parekh also advised the real estate developers to go for equity for fund raising even if it entails dilution of valuation and ownership. “Enhance the equity cushion. You need a higher cushion of equity,” he said.