Homebuyers across top property markets, including the Delhi-National Capital Region and Mumbai, continue to await delivery of their apartments which has made buyers wary of under-construction properties.
Top seven property markets of India have a total stock of 5.6 lakh delayed housing units worth Rs 451,750 crore, showed data from ANAROCK Property Consultants. These units were launched either in 2013 or before that.
Top cities such as the NCR and Mumbai Metropolitan Region (MMR) collectively account for 72% of the total stuck housing units across the top 7 cities worth Rs 349,010 crore, nearly 77% of the total worth of the stuck projects. In comparison, the main southern cities — Bengaluru, Chennai and Hyderabad — together account for a mere 10% of the overall stuck housing units of a total worth of Rs 41,770 crore.
Interestingly, among the two major IT destinations, Bengaluru is far better off than Pune in terms of the total number of delayed or stuck projects. Chennai has the least project delays during this period, with around 8,650 units worth Rs 5,620 crore, the data showed.
“Besides some developers’ lack of real will to complete their projects and preference for funds diversion, the tightening credit crunch has been one major factor contributing to this mounting problem. It has become a ‘chicken and egg’ situation — buyers have understandably stopped releasing funds to builders, and builders claim they have no funds to complete construction,” said Anuj Puri, chairman – ANAROCK Property Consultant.
Also, every delayed project results in cost overruns that compound the funding crunch even further. Lack of project clearances for whatever reason also contributes to the piling up of housing stock. In the pre-RERA era, many builders launched green field projects without the requisite approvals in place, resulting in their projects getting stuck.
By amending the Insolvency and Bankruptcy Code and treating buyers at par with banks and other creditors, the government has further protected the interests of the affected buyers. With this provision, even when builders opt for bankruptcy, the state authorities will intervene to safeguard homebuyers’ investments.
Besides monitoring cash inflows of the concerned entity, the government will try and ensure that the project is completed either by the developer himself or by outsourcing its completion to a third party. However, buyers are still waiting for the final outcome of these interventions.