Track2Realty Exclusive Yearly Analysis: Residential real estate is defying the conventional wisdom of economics where a constant price hike is not benefitting the real estate companies either. Track2Realty finds with pressure on both the demand and supply side, residential real estate has gone into a vicious cycle of ever increasing cost, falling demand, liquidity crunch and last, but not the least, delay in approvals adding to the woes of the developers.
After a turbulent couple of years following financial meltdown in 2008, when the market seemed to be on course of restructuring during 2011, crisis in the housing sector has yet again aggravated in the last one year due to paucity of funds as well as delays in securing approvals. Home sales have slowed down, private equity has dried up, the primary market is subdued, and banks have been reluctant to lend to builders. A combination of consumer activism, agitation by farmers, bureaucratic delays, labour shortage and legal wrangles has also contributed to holding up projects.
Facts speak for themselves. According to a pan-India survey by the real estate research firm Liases Foras, about 50 per cent of the 323,000 homes due for 2013 delivery will be delayed on slow construction approvals and liquidity issues. Most of the projects are lagging behind construction schedule, with a third not ready for a housewarming before 2014.
“There have always been delays, but it is a bigger concern today as the quantum of homes being built is much larger now,” says Deepak Parekh, Chairman of India’s biggest mortgage lender HDFC Ltd.
“Everyone’s money is stuck. It is not only bad for homebuyers, but also for the economy,” adds DK Mittal, Secretary, Department of Financial Services.
The delays leave lakhs of home buyers to grapple with another problem in the midst of rising prices and a slowing economy. “Individual home buyers have the option of taking recourse to the law, but almost no one does so as it is a cumbersome process and may lead to further delays if the builder digs in his heels,” says Vaibhav Gaggar, Partner at law firm Gaggar & Associates, which helps clients in real estate disputes, among others.
The track record of developers in the Delhi-National Capital Region have been the worst, with a 74 per cent late delivery rate, followed by Mumbai and Chennai at 61 per cent, Bangalore at 59 per cent and Kolkata at 57 per cent. “Data indicates that there would be more delays going forward because of the stress on cash flows of developers,” says Pankaj Kapoor, Managing Director at Liases Foras.
…….to be continued
