Dreading the Delay

Delayed possession is commonplace in the Indian real estate industry. Even as there was a spurt of project launches over the last two-three years, there is a corresponding dread too among home buyers that delays could be underway as the possession dates are nearing. A growing issue which is assuming vital dimensions in the realty industry, delays in home possession is causing a lot of concern and anger among customers

Owning a dream home is not as easy as it sounds. Despite the fat equated monthly installments draining one’s pocket every month, sometimes buyers fall prey to the devil of delayed possession due to manifold reasons.

According to survey by international property consultant Jones Lang LaSalle India (JLL), in terms of the average delay in delivering residential projects across India, more than 25 per cent of the committed supply has not been able to hit the market as per schedule.

“The National Capital Region’s performance in terms of delivery of residential supply due in 2013 has been the worst across all the major Indian cities. 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,”the JLL report said.

Many NCR-based developers such as Parsvnath, BPTP, lreo, Grand Arch, Vatika, Jaypee, Supertech, Orris and others are all set to complete their projects during 2014- 16. Although they are hopeful that they will meet their completion deadlines, the projects, it seems, may be delayed due to some reason or other. Among other things, due to the slow progress of their construction, the project completion may miss the deadline to some extent.

Though it is difficult to predict a project delay, bureaucrats in the sector feel that there must be an effective grievance redressal tool in the system to resolve such problems.

“It is true that at present there is no effective grievance redressal mechanism regarding delays of project. As far as the issue is concerned, it is not covered under HUDA jurisdiction,” said PC Meena, administrator, Haryana Urban Development  Authority (H U DA).

A lot of hope is placed on the upcoming Real Estate Regulator Bill. “Once the real estate regulatory bill is passed and the regulator is in place, I think all these problems will be taken care of by the regulator,” said Praveen Kumar, commissioner, Municipal Corporation, Gurgaon.

On being contacted many realty companies like Supertech and Panchsheel, they declined to comment non the delayed possession issue while realty giant DLF is quite hopeful that this year will be a year of delivery for DLF.

• In terms of the 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
• NCR’s performance in terms of delivering of residential supply due in 2013 has been the worst across all the major Indian cities. 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.

Ananta Singh Raghuvanshi, executive director (Sales & Marketing), DLF Universal Ltd told Realty & More that internally DLF hastried its best to lay down proper systems and controls so that it can deliver on-time and live up to its commitments.

“But yes there have been some projects in the past which got delayed, some were delayed because of reasons beyond our control, for instance in Panchkula, where we were very well intended, we started our construction, work was going on at full pace, then suddenly due to the court case we were pushed back to one and a half years, may be more,” Raghuvanshi said, adding that DLF was trying its best to cut back on delays and give the possessions on time.

 “Most of the new launches now are happening in the towns. As we have gone through the whole process, we have also understood the market much better. For us it was a first entry in a lot of cities, so that the first cycle will be completed now. So once you have made and handed over a thousand houses, after that when you launch the next phase of that same township, then you are alsobetter equipped. People, manpower, suppliers are in place, approval processes, policies of the respective states are understood,” she added.

Asked about the specific reasons that lead to delayed deliveries, Raghuvanshi said: “Lack of trained manpoweris a reason for the delays. The whole industry is in a nascent stage. In real estate industry you have to train people on the job -for final registration documents, for taxation related issues, there is an audit process,possession process itself is so complicated, and in the transfer process, there are so many checks-and-balances, and then, at the time of handing over many people also want to exit.”

Says Ajay Singal, director, Avalon Group: “As the ongoing slowdown engulfs the real estate sector, delays are becoming the norm for the sector. However there are a variety of reasons for the delay. A developer needs to sell about 40-50 per cent of the apartments in the project to have enough cash to begin construction. Amid the current slowdown, achieving this target generally takes a longer time. The rising costs of materials and labour have further compounded the developers’ financial woes. During the meltdown, all economic activity also comes to halt. This generally leads to a long chain of delayed payments by many buyers.”

According to media reports, in the Delhi region, which attracts the maximum number of investors , the list of delayed projects includes those from well-known developers such as Unitech, Raheja Developers, DLF and the Jaypee Group.

Developers are not to be blamed for all delays. “For instance, projects have been stalled for over a year due to the Naida Extension land acquisition debacle. Projects have to be cleared by several government authorities and procuring clearances is a long-drawn process too,” said Santosh Kumar, CEO, Operations, Jones Lang LaSalle India.

Whatever be the reasons for delayed possessions, the Indian realty sector stands to gain substantially in terms of more business and also in enhancing its prestige if this problem is addressed.

WHY PROJECT DELAYS?

Poor project management is often one of them but this is not essentially the prime reason. In fact, it is the current economic scenario- defined by high levels of inflation and escalating construction costs- that is the leading reason for delayed projects. Developers are facing a severe liquidity crisis and donot have the capital to complete their projects. However, there are also other factors at play. Apartfrom all other reasons, one of the more important ones is dispute on the proposed land because of which the court may pass a stay order on the construction. For instance, buyers in the Naida Extension came to know about the land dispute only after it was reported by the media. Had they tried to find out, they could have come to know on their own.

Delay in regulatory clearances is another critical reason for delays in project deliveries. In many cases of delayed projects in Delhi NCR, the water and sand crises as well as environmental regulations which developers have not been able to meet have played a role. In quite a few projects, the lag caused by various bureaucratic processes has also been an operative factor in delayed project clearances.

What Babus Say?

Once the real estate regulatory bill is passed and the regulator is in place, I think all these problems will be taken care of by the regulator
PRAVEEN KUMAR, Commissioner, Municipal Corporation, Gurgaon

It is true that at present there is no effective grievance redressal mechanism regarding delays of project. As far as the issue is concerned, it is not covered under HUDA jurisdiction.
PC Meena, Administartor, HUDA

WARNING SIGNS

Buyers need to be alert to avoid the risk of getting locked in a delayed project. The builder is likely to offer possession on time if a project has necessary approvals along with funding from a bank. Several projects boast of 100 per cent funding from foreign private equities and other investors, which means delays are less likely for lack of funds.

REMEDY RECOURSE

 Buyers have little say in booking agreements. The penalties for delay in payments by buyers are mentioned explicitly but obligations of timely delivery by builders are played down. Such lopsided agreements were common a few years ago. The draft real estate regulation bill, which proposes a sector regulator, seeks to outline the obligations of project delivery. Until regulations are put in place, buyers will have to rely on their rights laid out in their booking agreements.

CAREFUL INVESTING

Buyers looking for a home are the worst affected as they end up paying rent and interest on home loans. Investors are happy to see the prices of their property appreciate. So, the decision to seek refund or disposal of the property should be based on ground realities

What Developers Say

As much as any buyer would detest a delay, any developer with a sense of responsibility and accountability would also not want to go down that road. But, unfortunately in some instances, delays do happens. The causes can be as basic as lack of a foolproof strategic planning, lack of decision making power in time, payments, teamwork and coordination etc. There is no standard set of factors that cause delay. And then, it is not necessary that the causes stem from the developer’s end only. For instance, projects were stalled for over a year due the Greater Noida West land acquisition debacle. Projects have to be cleared by several government authorities and procuring clearances is a long-drawn process. Getting all approvals from government authorities is no less a time consuming process.
Satyendra Tomar, JMD, Proplarity Group

Lack of trained manpower is a reason for the delays. The whole industry is in a nascent stage. In real estate industry you have to train people on the job for final registration documents, for taxation related issues, there is an audit process, possession process itself is so complicated, and in the transfer process, there are so many checks-and-balances, and then, at the time of handing over many people also want to exit.
Ananta Singh Raghuvanshi, ED (Sales & Marketing), DLF Universal

Apart from external factors, some internal factors are also responsible for delaying the project like lack of daily construction target and proper review system, lack of strategic and execution planning, poor co-ordination, etc. We also have to think about the financial system for real estate in our country. Banks and financial institutions are always biased towards the realty sector and getting loans from financial institution is very tough and also very costly.
Nitesh Kumar, COO, TDI Infracorp

The intention of the regulatory bill is to bring and promote transparency on various fronts of the real estate business, including on the timely delivery of projects by developers. This is a welcome move and could go a long way in assuaging the concerns of buyers regarding timely possession and delivery. Having said that, I also feel that making the whole regulatory process smooth and efficient would be critical to achieving the stated objectives of the bill. If the bill helps to cut down on the time that is currently taken up in getting the various approvals and clearances for projects, it should certainly help a developer in meeting his construction schedule and speed up on the project delivery. Considering the inflation cost and rising costs of labour, raw materials and commodities, it is in the interest of a developer to complete his project as quickly as possible to avoid any cost overruns.
P SAHEL, Vice-Chairman, Lotus Greens

There is already unpredictable delay being faced by builders in getting approvals from multi-window systems and the very complex procedures for compliance of regulatory requirements. This is one of the major reasons for the delay. There is no established mechanism by which a customer can ensure that the project he investing in will not get delayed. However, there are a variety of measures which he can resort to minimise the uncertainty of delivery. It is important for him to ascertain that the project in question has received all government approvals, there are no legal hassles and the builder has a good track record of giving possession on time.
ANUJ GOEL, ED, KDP Infrastructure

As the ongoing slowdown engulfs the real estate sector, delays are becoming the norm for the sector. However there are a variety of reasons for the delay. A developer needs to sell about 40-50% of the apartments in the project to have enough cash to begin construction. Amid the current slowdown, achieving this target generally takes a longer time. The rising costs of materials and labour have further compounded the developers’ financial woes. During the meltdown, all economic activity also comes to a halt. This generally leads to a long chain of delayed payments by many buyers.
AJAY SINGAL, Director, Avalon Group