Delay in housing projects haunts buyers in Metros, NCR worst hit

NEW DELHI: The latest report by PropEquity suggests massive execution delay of 45 per cent of all projects surveyed the three metros. 

One-third of the housing projects in Mumbai and Bangalore and over two-third in National Capital Region will be unable to complete work on time mainly due to a severe fund squeeze, according to the survey.

PropEquity, a real estate data, analytics, intelligence and research firm released a report on Friday on the Execution Delays of Residential Projects in the National Capital Region (NCR), Mumbai Metropolitan Region (MMR) and Bangalore Metropolitan Region (BMR).

In all, nearly 45% of the 1,920 projects launched in the three metros suffered due to scarcity of skilled workers and the slothful attitude of the developers, the research study by Gurgaon-based firm revealed. The study covered projects which were launched between January 2007 and June 2009 and were expected to be delivered by January 2012.

While thousands of investors who have booked apartments in these projects continue to pay their loan installments, developers in NCR reported the worst on-time performance, completing just 23% of the projects they had taken up. In Mumbai, developers had completed 61% of the projects and the number of ready projects was 66% in Bangalore.

“NCR has contributed to lot of that delay, and the major reason is that the number of projects that were launched here very large compared to MMR and BMR. The other reason is that the realty market picked up post subprime crisis and several projects were announced, but the developers did not have the execution bandwidth for it, and in several cases used funds raised from one project to acquire land banks,” Samir Jasuja, founder and chief executive officer at PropEquity said. 

The significant construction delays in the NCR region were primarily due to large-scale construction of residential projects in Gurgaon, Noida and Greater Noida. The execution timelines were further extended due to delays in obtaining regulatory sanctions in NCR, which was lagging behind MMR and BMR in timely delivery of both small and large sized projects.

Developers, however, said there are several other factors, ranging from getting approvals to the Mahatma Gandhi National Rural Employment Guarantee Scheme and infrastructure projects, which were competing for workers. Lalit Kumar Jain, who heads Confederation of Real Estate Developers' Association of India (CREDAI), the industry lobby group, said the Reserve Bank of India's decision to discourage banks and finance companies to lend to real estate companies had dried up domestic funding.

The significant construction delays in the NCR region were primarily due to large-scale construction of residential projects in Gurgaon, Noida and Greater Noida. The execution timelines were further extended due to delays in obtaining regulatory sanctions in NCR.

NCR was again lagging behind MMR and BMR in timely delivery of both small and large sized projects.

Of the delayed projects in the three regions, 40 per cent may be delivered by December end of 2012 as they are at the finishing stage and would be completed in the next few quarters. About 12 per cent of the delayed projects are expected to be delivered by 2014 end as they are most likely at excavation stage and would need around three years for completion.

Within BMR, 33 per cent of the affordable housing projects were delayed, followed by 31 per cent delay in the mid-end housing projects and luxury housing at 45 per cent. While in MMR, 37 per cent of the affordable housing projects were delayed, 36 per cent delay in the mid-end housing projects and luxury housing at 48 per cent.

The report further shows that small-sized projects (under 300 units) saw 62 per cent completion rates compared to just 23 per cent completion rate for large sized projects (above 300 units). Large-size projects are developed in phases, and realtors launch subsequent phases based on housing demands in that region.