How much money is stuck in delayed residential projects? Rs 4.6 trillion

Cash crunch, environmental clearance, RERA among reasons for the delay

The amount of money stuck in delayed residential real estate projects across the country is a staggering Rs 4.64 trillion, according to property consultants and research firms.

The projects have been delayed for multiple reasons that include litigation, cash crunch, development practices going wrong and construction violations, according to a research conducted by Anarock Property Consultants. 

Most projects that are stuck are in Mumbai and Delhi with the value for the two cities being Rs 2.34 trillion and Rs 1.26 trillion, respectively. What may come as a surprise is that the value and volume of delayed projects in Pune is more than the combined figures of the three major south Indian cities, i.e. Hyderabad, Chennai and Bengaluru. This is an indicator that developer practices are more disciplined in that part of the country than in the west.
 

For example, developers Unitech Group, Amrapali Group and Jaypee alone have over 120,000 apartment units remaining stuck for over three years in Noida alone, according to one real estate executive who declined to be named. 

According to PropEquity, a real estate advisory, the value of delayed projects is different but still in the trillions. PropEquity indicates that at least Rs 3.3 trillion is stuck in projects awaiting execution. 

Anuj Puri, Anarock’s chairman, said, “Realising the significance of real estate on the economy, the government has taken measures to heighten transparency and efficiency.” Some steps the government has taken to boost the realty sector are introduction of the goods and services tax (GST) and the Real Estate Regulatory Authority (RERA), the act that regulates developers and aims to ensure that they do not run amok with lagging projects after taking advances from customers. 

“Buyer discontent is yet to be addressed despite these game-changing policies,” Puri added. The top causes of delayed possession are developers facing extended cash crunches, delays in environmental clearance, disputes, and non-RERA compliance in some states.

He said that presently, RERA is fully operational in just a handful of states such as Maharashtra, Karnataka, Gujarat, Rajasthan, Madhya Pradesh and Punjab with around 11 others that have interim regulations in place.

Even so, industry leaders do see RERA as a step in the right direction.

Pirojsha Godrej, chairman of Godrej Property, said, “In my view, RERA will bring significant changes to governance in the sector and only developers able to meet their commitments will remain relevant.”

Others see completion on time boosting sentiment. Sunteck Realty’s chairman and managing director Kamal Khetan said that laws may have been set in motion but finishing projects on time is vital because housing can be one of the more stabilising factors in the economy. “When housing is delivered on time, it delivers a booster shot of confidence not just to end consumers but also to banks, and the entire financial system.”

Gautam Chatterjee, RERA’s chairperson in Maharashtra, did not respond to queries made to him. Pradeep Jain, legal head of Omkar Realtors & Developers, said that when projects get stuck, everyone associated with it gets hurt even if the violations are made by one single party. “It’s like a disease that can spread,” Jain said, “and that’s why defaulters ought to be penalised in an innovative manner, even at the personal level but authorities must ensure projects continue.”

Luxury skyscraper Palais Royale being built in Mumbai was halted by authorities after NGO Janhit Manch filed a PIL suggesting that parking space violations were conducted. 

Vikas Kasliwal, vice-chairman and chief executive of Shree Ram Urban Infrastructure, which built Palais Royale, refutes the charges. 

He has contested them in court and the building has been stuck for the last six years leaving numerous customers who have paid more than half the cost price, that ranged between Rs 300 million and Rs 500 million, in the lurch. 

Kasliwal said that stalling buildings without a resolution date is criminal in nature and that the courts need to come together to create a foolproof system that eliminates delays. “Whosoever is obstructing to such development should be eliminated from the system, and the objective should be to complete building instead of going round in legal circles,” Kasliwal said.

He goes on to add that in reference to his project, the common refrain he hears from officials is that “We do agree with you but what can we do?” That needs to change. 

The bottomline is that the whole eco-system gets impacted due to delays, with the customer being at the receiving end.