Rs 3,30,000 cr stuck in delayed projects

The menace of delays is still haunting the realty sector across the country. Implementation of RERA and court decisions against errant builders have set the tone for a more organised sector, but over 4.65 delayed units continue to remain an irritant for homebuyers. This has been revealed in a report released recently by property portal PropEquity.  

These projects are on hold for a variety of reasons, including financial constraints, execution challenges, surplus supply due to over ambitious launches by developers, environmental clearances and slow sales,  among others.

The total value of projects facing construction delays is estimated to be Rs 3.3 lakh crore or over $47 billion. Interestingly, in the National Capital Region (NCR) over 70 per cent of the projects pending execution are fully sold out but not delivered even after the given deadline. Hence the developers here are under the maximum distress as they face the buyer pressure to complete the sold units.

• Nearly 1.80 lakh units valued at Rs 1.22 lakh crore are facing an uncertain future in the NCR region (Gurgaon, Noida, Greater Noida, Ghaziabad, Faridabad).
• In the Mumbai Metropolitan Region (MMR), 1.05 lakh units worth Rs 1.12 lakh crore are pending completion. Since over 40 per cent of these projects are absorbed, there are fewer customers when compared to NCR, who are facing non-delivery by developers.
• Kolkata and Hyderabad have been relatively insulated as compared to other regions as only 15,552 and 13,710 units respectively are pending execution with a valuation of Rs 6,175 crore and Rs Rs 7,778 crore, respectively. Both these cities were able to sell less than half of these projects.
• As Bangalore is an end-user driven market, only 40 per cent of the projects pending execution were sold as these projects found few takers only. Total value of these projects stood at Rs 26,454 crore for 38,242 units.
• Pune, which has 22,517 units on hold, witnessed only 35 per cent absorption of these units. Comparatively, Chennai with 20,847 units facing execution challenges saw 47 per cent of these projects being sold valued at Rs 9,511crore.

“Our latest research further reiterates that projects that are completed or nearing completion are attracting maximum buyers as these projects seem to be most risk averse in the eyes of the buyer. However, we also believe that projects by renowned developers, with strong fundamentals would continue to do well irrespective of stage of construction,” Samir Jasuja, Founder and MD of PropEquity.

Thus, as the real estate market gets accustomed to reforms like GST & RERA, absorption for ready-to-move and nearing completion projects will witness a preference. Affordable and mid-income segment is expected to further grow due to favourable government policies. “We also foresee an era of consolidation that will be led by the larger and more capable developers who have the construction and execution capability to meet their commitments”, adds Jasuja. — TNS