Unlike Your Pizzas, Home Deliveries to be Delayed

DREAMS CRASH A new survey shows nearly half of the 323,000 homes to be delivered in 2013 will be delayed     Here's a shocking piece of news for those waiting to take possession of their homes next year. A new survey has found that nearly half of the 323,000 homes to be delivered in 2013 are lagging behind construction schedule, with a third not ready for a housewarming before 2014. In addition, nearly three of every four homes promised for delivery in 2014 are also likely to be delayed, real estate research firm Liases Foras has found in a nationwide survey conducted recently. "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 problem that began in 2010, when the economy started to weaken, has 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 the holding up of projects. The delays leave lakhs of homebuyers to grapple with another problem in the midst of rising prices and a slowing economy. "Individual homebuyers 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. "If they choose, buyers could invoke a clause that is part of most standard contracts, to terminate the contract and get back their money with interest. If the person chooses to retain the property, he could file for compensation and damages by proving that he has been injured financially," added Gaggar. At present, contracts between buyers and builders provide for a per sq ft compensation in case of delays. "But the amount is minuscule," he said. Builders in the Delhi-National Capital Region have been the biggest culprit, with a 74% late delivery rate, followed by Mumbai and Chennai at 61%, Bangalore at 59% and Kolkata at 57%. "Data indicates that there would be more delays going forward because of the stress on cashflows of developers," says Pankaj Kapoor, managing director at Liases Foras, the firm that carried out the survey. Supply, Demand Both a Concern  This non-brokerage real estate research and rating firm services banks like HDFC, Axis Bank, Deutsche Bank and Standard Chartered as well as big real estate companies and private equity (PE) funds.  Experts say there are liquidity concerns both on the supply and demand side. Many developers are faced with a liquidity crunch and cashflow issues due to slowdown in home sales, and this is turn is impacting their ability to finance construction of new properties.  "Home sales are down nearly 40% because of the very high cost of homes. This is becoming a vicious cycle," says Anckur Srivasttava, who heads GenReal Property Advisers, a property consultancy. Adds Anshuman Magazine, managing director of CB Richard Ellis: "There is a liquidity concern on both the supply and demand side due to high interest rates and high prices. The impact of the slowing economy is reflecting on the ground now, in demand slowing down and execution of projects being hit." According to a recent report by real estate consulting firm PropEquity, the number of unsold properties in India's top seven cities at the end of December this year is expected to be around 32,000 units and valued at over . 21,000 crore. Developers argue that liquidity issues are just one of the reasons for the delays. More pressing is the issue of getting approvals on time to get on with construction. "After the first approval, subsequent no-objection certificates and approvals like water, electricity connections, completion certificate and others get delayed," says Lalit Kumar Jain, president of the Confederation of Real Estate Developers Associations of India (Credai), the national association of builders. The regulator will, however, have the right to give an extension to the builder on a case-to-case basis.  ravi.sharma@timesgroup.com