Supply blues persist in realty sector

Despite promises, this year seems likely to disappoint buyers waiting for possession in large measure

The year 2013 was projected as the year of delivery for residential projects which had been stuck for years. While developers claim they are on course to supply a large number of units this year, sector watchers doubt it.

Data from research firm PropEquity for delivery of units in the first two months of this year show most cities, apart from a few exceptions such as Chennai, are way behind target.

In Gurgaon, the committed supply was projected at 38,684 units in 2013; builders delivered just 360 in the first two months. In Noida, only 160 units were delivered in January and February, even as the full year’s supply is pegged at 49,540. Mumbai has delivered 1,378 units in the first two months, against a projection of 22,820 for the full year. Chennai looks well set to almost meet the target, as builders here supplied 6,024 units in January and February against a commitment of 51,592 for the full year.

According to Samir Jasuja, founder and chief executive officer at PropEquity, while some developers would focus on commitments, others might be tempted to divert interest to newer projects. “Generally, projects of smaller size would see completion, while large townships could face execution delay risks,” he said.

Another expert, who didn’t want to be named, said it would be difficult for developers to even give half of the committed supply for this year.

Recent research by international advisory firm Jones Lang LaSalle (JLL) said as many as 63 large residential projects in the National Capital Region were delayed, some by four to six years. The delays include those of Parsvnath, DLF (Belaire), Jaypee Group (Jaypee Greens), BPTP and Unitech (Unihomes), amongst others.

JLL real estate research head Ashutosh Limaye spoke of the inventory pile-up. In Mumbai, the inventory is about 34 months, Bangalore 23 months, Chennai and Hyderabad at 12-24 months.

Builders cite several reasons — not getting requisite approvals, slowdown in the market, land acquisition and farmers issues, among others. For instance, Unihomes, an affordable housing project by Unitech in Noida, was supposed to be delivered in 2011-2012; possession is yet to be given. Supertech’s  EcoVillage project in Noida has been late by over a year; DLF Express Greens, launched in 2009, is also delayed by a year, according to buyers who’d booked flats in these projects. SVP’s Gulmohar Garden in Raj Nagar Extension (Ghaziabad) has been delayed by more than two years.

In Mumbai, projects that have been significantly delayed (average of 12-24 months) include those of Arihant Associates (Anand Towers) and Gurumauli Developers (SreeOmkar). In Pune, Paranjape Schemes’ Yuthika and Alcon Builders’ Alcon Silverleaf. In Bangalore, Dreamz Infrastructure’s Dreamz Sampoorna and the Paras Group’s Paras Manyata. In Chennai, Landmark Construction’s Orlando and Prince Foundation’s Prince Courtyard, said analysts.

Reasons
The problem is spread across the sector, triggered primarily by the economic slowdown in 2008-09 and slowing sales. Thereafter, it was a vicious cycle, said experts. Jasuja of PropEquity said certain developers took projects beyond their execution capability and into markets where they had no presence, which led to execution delays.

On the delay in UniHomes, a Unitech official said, “The construction activities at our Unihomes project in Noida were progressing well till affected by the farmers’ demonstrations, agitations and dharnas. Once those issues got resolved, we subsequently ramped up the work force.” The company said it was intending to hasten the pace in the coming months.

DLF also claimed work at their project site was in full swing and possession would be given by this October.

SVP, in reply to a questionnaire, said a builder can only develop internal infrastructure and other basic amenities. “But beside that, there is basic infrastructure people require for every locality, such as electricity, road connectivity, wide roads, water supply and sewage lines, which are not in our control,” it said.

Notwithstanding the delays in ongoing projects, a number of real estate companies, including DLF, Unitech, SVP and Supertech, are going ahead with launches, to generate cash flow in a tight market situation. Unitech has launched a new project in Noida, SVP in Indirapuram (Ghaziabad), DLF in Gurgaon, Supertech in Noida and Greater Noida. Interestingly, SVP has gone to the extent of launching the second phase of Gulmohar Garden.

Jasuja explained these new launches were meant to monetise the land banks, as well as generate cash flows to ease the builders’ liquidity conditions.

Harinder Singh, managing director, Realistic Realtors, attributed the large number of launches this year to several developers getting licences and other permissions required to launch a project.

According to PropEquity, deliveries from committed supply are pegged at about 517,365 units from the top 15 cities this year, higher than the actual delivery for the preceding two years put together from these cities. In 2012, about 291,000 homes were delivered against 172,000 in 2011.