Steep prices, delayed delivery make homebuyers cautious

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GURGAON: Promised a house in an upcoming society along the Dwarka Expressway in Gurgaon, Rohit Sarin (name changed) has been paying EMIs over the last 5 years. Rohit, who till recently was working overseas, was hopeful that with the reputation the builder had, and the promises of an adjoining 150m link road to Delhi, he would have the possession of his 4-BHK apartment by 2011-end. With all delays calculated, Rohit was confident that at least by the third quarter 2012, he would start earning rental income on his new house.

However, never-ending delays, abusive builder-buyer agreement and inaction by the government functionaries, have left Rohit in a tight spot. Now, after losing his job two months back, Rohit is still trying to make adjustments to his hefty EMI, while he is yet to take possession of his house.

While the delayed delivery of projects in Gurgaon is a cause of concern for most homebuyers like Rohit, the larger picture reveals a bigger loss for both homebuyers as well as investors who have put their money in the projects.

According to market analysts, it is not necessary that all real estate under-construction projects would reap profits to their buyers/investors. Moreover, developers are going slow on the execution of real estate projects, resulting in a drop in supply of residential apartments in most prime markets, adding to further delays.

According to Santhosh Kumar, CEO – Operations, Jones Lang LaSalle India, delayed delivery of residential projects has become a significant issue in the real estate market, leading to ire among customers. “In terms of average delay in delivering residential projects across India, more than 25% of the committed supply has not been able to hit the market as per schedule. The performance in NCR in terms of delivery of residential supply due in 2013 has been the worst across all the major Indian cities,” he said.

In Gurgaon, only one-third of the total committed supply for 2013 has been delivered so far. The situation has been even more alarming in other NCR regions such as Noida, where only about one-fifth of the residential supply committed for delivery in 2013 has been delivered so far.

Ramesh Menon, director, Global Initiative for Restructuring Environment & Management (GIREM), said, “With prices increasing, the consumer is adopting a wait-and-watch policy. Developers are essentially hiking prices so that investors can make money. But end-users are not accepting the prices. In Gurgaon, there is nothing available under Rs 70-80 lakh and not everybody, especially an end-user, has that kind of money.”

Suggesting the right move, Menon added, “As an investor or buyer, one needs to be careful about the developers’ profile and their previous work. Be cautious while investing in projects that are already delayed.”

Delay in a project can be categorized as certain and uncertain. To get approvals for starting a project is considered certain while there are cases like massive labour shortage or court or administrative decisions, which can be categorized as uncertain. “There is an urgent need to reform the system of approvals to boost the real estate industry. There should be a mechanism where a developer can get all his approvals under one roof. In many cases, construction is delayed due to the long process of getting approvals from various government agencies,” said Amit Gupta, managing director, Orris Infrastructure.

A Delhi-based builder, who have projects in NCR, said, “It is a wrong perception that all developers are going slow. Of course, developers are cautious about new launches and focusing on liquidating stock in existing projects in order to generate cash. The real estate sector always gives high return provided investors stay for a long time and take a time horizon of 3-5 years from the date of investment. In Gurgaon, as in other cities in NCR, there is hardly any increase in basic prices of the projects which were launched a couple of years ago.”


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