An estimated $47 billion worth of housing projects in India are experiencing delays of from two to eight years, according to a report published yesterday by a property research firm. In total, 600 million square feet (56 million square metres) of space is said to be held up by slow sales, troubled developers and regulatory bottlenecks.
The delays in completing projects is expected to spur industry consolidation, as less-well-financed players sell projects to better-backed developers after being caught between extended delays in delivering new homes and rising resentment from homebuyers.
Samir Jasuja, founder and managing director of online real estate data-provider PropEquity said of the project delays that his company expects 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.” Jasuga added that his firm expects the bigger, better known developers to fare well this year.
No Certainty on Completion
By location, in India’s National Capital Region (NCR) around Delhi some 70 percent of the projects pending execution are fully sold out, but have failed to deliver finished homes t0 consumers, despite being beyond the agreed project completion deadline.
The completion crisis follows years of lagging demand for housing in India, a situation made worse by new regulations and an oversupply of homes. According to the PropEquity report, an estimated 1,687 projects with 465,000 units are having difficulty meeting their delivery obligations. Frustrated buyers have taken to the streets and filed complaints in court seeking relief in the case of long-delayed projects.
“There is no certainty when these (projects) would be completed,” Jasuja told the Press Trust recently.
$20 Bil in Loans at Risk
Bloomberg reported at the end of July that up to $20 billion of loans to Indian property developers may be at risk following a 40 percent decline in sales volumes over the past four years and a 20 percent fall in prices over the same period. Non-bank financial institutions are particularly in danger.
In Gurugram, southwest of New Delhi, homebuyers had put 80 percent down on units in the 1,862 home Greenopolis project, which is still only 40 percent complete, nearly three years after its scheduled December 2015 completion date. The local branch of India’s Real Estate Regulatory Authority (RERA) this week intervened and is now supervising the project.
On Wednesday, the Supreme Court ordered Noida-based Amrapali Group to raise the money needed to handover 43,000 homes promised and has ordered the unfinished projects to be taken over by the National Buildings Construction Corporation (NBCC).
Residential Sales Up 25% in 2018
Despite the overhang of unfinished projects, home sales in India’s seven largest cities grew 25 percent during the first six months of 2018, compared to the same period last year, according to research by JLL.
“The significant turnaround witnessed in the first half of 2018 was a much awaited boost to the residential sector. End user confidence in the market has strengthened on account of timely completion, implementation and adherence to RERA laws, good governance leading to accountability and transparency in the system,” Ramesh Nair, CEO and India country head for JLL said in a statement.
While the average growth in India’s largest cities was robust, the eastern hub of Kolkata led the way with year on year growth of 280 percent. JLL points to successful intervention by RERA as having increased confidence among home buyers, as general market sentiment improves.