Master Builders Australia is predicting a 27 per cent plunge in home building activity and 17 per cent slump in commercial construction this financial year.

The industry body fears thousands of business will soon go bust without significant government stimulus.

"Our industry is facing a bloodbath, there is simply no other way to describe it," MBA chief executive Denita Wawn said on Monday.

"Private sector investment is evaporating and the government must step in to save businesses and jobs."

The group is calling on the federal government to extend its HomeBuilder grants program for another year to help the sector through the coronavirus pandemic.

It also wants a similar scheme set up for commercial construction, at a combined cost of $5.1 billion.

MBA's predictions are worse than forecasts from both Treasury and the Housing Industry Association.

Labor's housing spokesman Jason Clare said the figures were proof the housing industry was about to go off a cliff.

"Instead of putting a guard rail at the top of the cliff, the Morrison government has put a mattress at the bottom," Mr Clare said.

"Unless the government takes action, the only thing a lot of tradies will be building in the next few months is a longer line outside Centrelink."

Labor has been calling on the government to build more social housing and provide more support for first home buyers.

The $688 million HomeBuilder program provides grants of up to $25,000 to help people build or renovate.

The grants are only open to single applicants earning no more than $125,000 per year or $200,000 for couples.

The government expected it to drive 20,000 new builds and 7000 renovations.

But only 247 applications have been received for the program so far, including 157 from South Australia and 90 from Tasmania.

HOMEBUILDER ELIGIBILITY REQUIREMENTS:

* Recipients must be owner-occupiers

* Single applicants must earn no more than $125,000 per year or $200,000 combined income for couples

* Contracts must be signed by December 31

* Construction must start within three months of the contract date

* For renovations, the existing property value must be no more than $1.5 million, and the renovation must be worth between $150,000 and $750,000

* For new builds, the house and land value must not exceed $750,000.

Australian Associated Press