Delay in Handing over the Possession of Homes to end user!

Have you booked a home and been promised delivery in next two years? Are your finances planned accordingly? If yes, then unfortunately you belong to the same section of people who are waiting for their homes to be built and delivered long after the promised date has come and gone. The same masses who had planned their EMI’s as per the delivery schedule and are now facing the hard punch of bearing the heavy burden of rent and EMI, both at the same time.

Delay in construction and delivery of projects have become the latest trend now.Having a look at the numbers shall leave one astonished with the biggest lag in delivery being faced by the Delhi NCR region. Over 72% of the 6.45 lakhs home that were supposed to be delivered this year in Delhi NCR region have failed their commitments and delivery certainly do not look near for the next two to four years. As per the analysis made by Prop Equity, Ghaziabad and Noida home owners faces an average delay in delivery of 30 months while Gurgaon delivery schedule runs behind by 34 months and Faridabad scores the highest in the category with an average of 44 months delay in delivery schedule. Places like Pune and Mumbai have fared better off delivering approximately forty percent of the projects as per schedule. If we take an overall average PAN India almost 25 percent of the projects are behind their committed delivery schedule. The irony is that the most respected and talked about builders top the list of delays and when asked for the reason, the ones given are mostly beyond their control.

Let us try and understand the primary reasons to the delays and assess their genuineness:-

• Proceeds used to buy land – The proceeds deposited by the customers as a token towards purchase of residential units are instead used to buy land for other projects and also is utilized towards marketing of such projects. In the end what results is a stack of brochures and marketing material being printed by using such proceeds while the construction of the actual project has not even begun.

• Cumbersome approval and permissions mechanism – A project has to undergo a series of approvals both from central and state government which results in major delays in starting the project. The approvals and clearances may take anything up to 2-3 years and thus prove to be a major hindrance in keeping up the commitment of the delivery schedule.

• Unplanned market – The real estate market is unquestionable an unplanned one where several stakeholders have to come together without any proper regulations to achieve the construction target. This invariably results in disputes, conflicts and other issues causing delays due to one or more stakeholder.

• Liquidity Crunch – Banks and other financial institutions do not have adequate mechanism to provide sufficient and long term loans extending up to the tenure of the real estate projects. This results in the builders having to either borrow from outside at expensive rates or ending up in the vicious circle of liquidity crunch leaving them crippled with little scope for progress in construction. Non availability of credit at cheaper rates and for term as required remains a major contributor to untimely delivery of projects.

Due to Real Estate being a highly unregulated market there is no structured process that can be followed for grievance redressal leaving the unfortunate buyers not much options rather than endlessly waiting for their turn to come. Though there are legal recourses available that do give favorable judgement towards the buyers, the fact remains that they are ill-equipped and under-regulated to offer complete consumers protection in matters related to real estate. However, as consumers are becoming more and more cautious and aware of the situation, they are not shying away from taking legal recourse to their problems.

Mr. Suresh Kumar who resides in Phase 3B1, SAS Nagar , Chandigarh is a fine example who took up a case against the real estate developer K Soni Builders and Promoters (P) Ltd for delay in delivering the residential unit that he had booked KSB Royal Heights, SAS Nagar which was scheduled for delivery in December 2012. The district consumer disputes redressal forum gave a judgement in the buyers favor directing the builder to pay Rs. 50,000 as compensation and another Rs. 11,000 towards litigation expenses.

While customers are filing complaints, builders like BPTP Ltd. are soaring to newer heights irrespective of such complains and delays. As per news in The Indian Express, BPTP announced standalone profits of Rs 183.5 crore and Rs 54.2 crore in financial years 2011-12 and 2012-13, respectively, even as it defaulted on its loan repayments to three banks for up to three months during the quarter ended March 31, 2013.The satire is that owner of BPT Powns a condominium in a super-luxury apartment in New York for over $19 million at a time when his company is faced with the ire of consumers over delivery delays, has not been doing badly in financial terms.

There are several loopholes in the real estate market and lot is to be initiated to help the buyers get ownership to their dream homes on time. Professional approach by the developers and industry on a whole, proper utilization of fund instead of diversification for other projects, easier availability of credit, better circulation of funds through foreign capital inflow and reduction in interest rates look like the possible measures that should enable the market to get streamlined and a stability to resume within the industry.

Vijay K Wali is the Director, Operations with Smart Homes Infrastructure (P) Ltd. Smart Homes Infrastructure is a subsidiary of Smart Homes infrastructure Pte Ltd. Vijay K Wali is a thorough professional with more than three decades of experience in construction of residential and commercial projects. Was associated with PWD (Public Works of Department, J&K, India)

Smart Homes is a professionally managed young organization that specializes in affordable Group Housing and Town Planning Projects in India and plans to build more than 100,000 homes in next decade. Smart Homes has a Team that has over 200 man years of experience in development of apartments in group housing projects and the team has the experience of selling more than 80 million square feet of housing projects across India.