Property worth $47 billion is locked in delayed projects across India, causing distress among homebuyers. The bulk of this is in the National Capital Region (NCR) and the Mumbai Metropolitan Region (MMR).
As per findings by PropEquity, a real estate analytics company, more than 4.65 lakh units in housing projects across India are running ‘significantly behind their delivery deadlines’ with ‘daunting’ construction delays.
“Total value of projects facing construction delays is ₹3.3 lakh crore ($47 billion),” PropEquity said in a report. The National Capital Region accounts for more than 70% of projects that have failed to meet completion deadlines.
Bulk in NCR, MMR
Almost 1.8 lakh units valued at ₹1.22 lakh crore are facing an uncertain future in the NCR region (Gurugram, Noida, Greater Noida, Ghaziabad, Faridabad). In MMR, which includes Mumbai, Navi Mumbai and Thane, 1.05 lakh units worth ₹1.12 lakh crore are pending completion.
These projects are on hold on account of financial constraints, execution challenges, surplus supply due to over-ambitious launches by developers, environmental clearances and slowing sales, among others, PropEquity said. “Although the markets are facing significant execution delays we do expect reputed developers to perform well,” said Samir Jasuja, founder and MD, PropEquity.
“We also anticipate that the resolution to this difficult scenario will occur in the form of consolidation that will be led by the larger and more capable developers who have the construction and execution capability to meet their promises,” he said.
Funding is another issue. “Most of the projects are stuck because their developers do not have funds to complete the projects,” said Ankur Dhawan, chief investment officer, PropTiger.com
“These developers are currently looking for JV partners who can bring capital to complete the stuck projects as the balance sheet of existing developers do not support further funding from financial institutions.” He said RERA, a law brought in to enforce strict norms on developers, has not helped solve the issue as it had allowed developers to offer new completion dates without facing financial penalties.
Deadline change debate
“One possible solution is for RERA to enforce original completion dates which will force developers to expedite these joint ventures,” he said.
In Mumbai, several developers have witnessed project delays. Among them, Nirmal Lifestyle has projects in the Central suburbs. One of its projects was stuck for eight years as the property had been attached by the Forest Department which claimed the land as its own.
“The forest land issue had stalled many projects in Mumbai and Thane including one of our projects in Mulund. The Supreme Court recently lifted the attachment, [and] we have started construction,” said Rajeev Jain, director, Nirmal Lifestyle. Under RERA, the developer has given a new completion deadline and is looking forward to hand over the units to those who had booked apartments.
Customers had booked flats at ₹2,000 a sq ft and Nirmal Lifestyle is building the stalled project at a construction cost of ₹8,000 per sq. ft. Once complete, the apartments will be valued at ₹17,000 a sq ft.
“With RERA coming in, things will improve. Under RERA, one has to complete the project in time. If the government brings in a law for timely permissions and no surprises come, then all projects will complete in time,” Mr. Jain said.
Earlier, developers were disorganised and permissions too were delayed, impacting projects. On the flip side, RERA has given an opportunity to developers to be transparent and deliver as per a new deadline. This has helped place stalled projects on the fast track. Developers believe the backlog will clear in the next 2-3 years.
