Wary buyers are reluctant to pay the developers; banks are also shying away from giving loans to the realtors to complete projects
GURUGRAM: Despite having paid ₹70 lakh for his three-bedroom apartment in 2010, there is no assurance that 32-year Itender Singh and around 500 other homebuyers in the project would get their houses any time soon.
YOGENDRA KUMAR/HT PHOTO■ A vacant plot in Sector 70, where lowrise apartments were to be constructed by realtors and delivered by 2014. Buyers have been protesting but are unsure of the delivery timeline.The construction work at Universal Aura project in Sector 82 has been stalled for the last three years despite complaints at all forums, including the police.
It is estimated that across Gurugram, flats of over 1 lakh buyers are affected, by delays of three to five years. “I have lost hope of getting the apartment despite pursuing the matter with authorities, police and in the court. There is no solution as the developer admittedly has no money,” said Singh.
The only consolation for buyers like Singh is that the developer is still in business and has promised to find a solution. However, for homebuyers and investors who bought projects sold by Unitech, Adel/landmark, Pal Infrastructure, Earth Infrastructure and several such developers, the hope of getting relief is little as promoters are facing criminal charges or projects are mired in court cases.
Data released by Anarock real estate consultant reveals that developers in Gurugram were not able to deliver around 19,400 units in 2017 and the delivery of these units was postponed. Of 27,300 units that were to be delivered in 2017, only 29% were handed over to buyers and around 14,400 units (53%) are to be delivered by 2018-end.
“What about the units that were to be delivered in 2018? The entire industry has been caught in a web of its own making. Buyers have been duped, investors stuck and there is no escape route, ” said Sanjay Sharma, a real estate consultant.
An analysis of data made available on the department of town and country planning (DTCP) website reveals that of 172 projects along the Dwarka Expressway, more than 120 are delayed. Of the 70 on the Southern Peripheral Road (SPR) and Golf Course Extension Road, half are in various stages of construction, but the situation is slightly better in terms of delivery.
“The apartments, the expressway and internal infrastructure all are delayed. In fact, the state has failed the people, who have nowhere to go. Even residents who have got flats find it difficult to survive without amenities,” said Prakhar Sahai, an executive member of the Dwarka Expressway Welfare Association.
The situation has worsened to such an extent that the officials of the Haryana Real Estate Regulatory Authority (HRERA) were mobbed twice in the last five months by disgruntled buyers.
WHAT WENT WRONG
Real estate experts, property dealers and regulators said the main reasons for the delay is a diversion of funds for other projects and investments, tweaking of norms to bypass regulatory clearances and environment rules, which was accentuated by the government’s tedious licensing policy and lax monitoring.
“Consumer sentiment was severely shaken by these delays and finally brought the sector to a standstill. Developers’ profits took a massive hit and their negative cash flows made the delays longer,” wrote Prashant Thakur, research head, Anarock real estate consultants.
Ramesh Menon, CEO, Certes Realty, blames the 2006 Gurugram masterplan.
“The plan was real estate driven, with maximum focus on licensing the farmland so that projects could be sold. Anyone who had land or money was allowed to enter the real estate sector, irrespective of the capacity or experience and the result is there for all to see, ” said Menon.
Another major folly during boom years was that real estate projects were marketed as financial products with the promise of endless speculation and quarter on quarter growth, say experts.
To facilitate unregulated urbanisation, the government also revised the Gurugram-manesar masterplan thrice from 2006 to 2014 with the sole purpose of delivering more land to developers.
The enormity of this exercise can be gauged by the fact that during these eight years, over 18,000 acres was licensed to developers for residential us.
In comparison, the DTCP gave licences for a minuscule area 1,200 acres for residential purpose in the last four years.
Experts said that laxity of the government allowed developers to raise money against unsold inventory, but they failed to factor the risk of oversupply.
THE ROLE OF BANKS
While banks played a key role in financing the real estate boom in Gurugram, they also ensured that buyers’ credit or loan repayment ability was monetised to ensure that developers continued to sell apartments even if the projects were not viable, irrespective of the promoters’ track record.
This ensured that banks and builders had insured themselves against defaulters, but buyers bore the risk.
“I bought an expensive low-rise floor from Unitech in 2010, but it is yet to be delivered. The money which was to be kept in an escrow account was diverted. The bank gave a loan to developer for the project, but this was also spent elsewhere. We complained to the bank, its CEO and even the ombudsman, but did not get a satisfactory reply,” said Vibha Batra, a city-based professional, who bought a floor in Unitech Espace project.
Rajat Gupta, managing director, advisory and transaction services, CBRE, however, said that developers with a good track record and sound corporate governance practices are getting funds.
A spokesperson for Unitech said, “The matter between the buyers and developers is subjudice and the directions of the Supreme Court will be followed in letter and spirit. We are making all efforts to ensure that the projects get delivered and work on projects which are stalled be resumed. Also, licences of projects are getting renewed and various options are being considered to ensure delivery. We have also handed over flats on as-iswhere-is-basis to some of the buyers”.
Universal Developers and Adel were not available for comment.
CONSOLIDATION IS THE WAY FORWARD
While the government has set up HRERA to ensure recalcitrant realtors are made to deliver, the industry itself is looking for answers to find a way out of the situation. “Soon, the market is going to witness large-scale consolidation in the industry, with several smaller players either selling out or collaborating with bigger players. They have now understood that real estate is not about licensing but about the building. I have received four to five such proposals and am analysing the same,” a leading developer said.
Anuj Puri, chairman, Anarock Property consultants, said many small businesses may not be able to manage the requirements and may choose to exit. “We are likely to witness a massive consolidation of real estate businesses in 2018. This will include all stakeholders of the real estate sector, including developers and real estate consultants. Post cleansing of the system, only good players with the right business intent will continue to operate,” said Puri.
Industry experts said that bringing back normalcy could take a few years. “The setting up of HRERA is a positive step and it will bring accountability and transparency to the system. No new launches have been announced and the industry is learning from experience. Things are going to improve hereon,” said Ashutosh Limayae, research head, JLL.
Even as industry figures out consolidation, the government is trying to improve regulation and enforcement. “In the last two and half years, several meetings of the AGRF were held and developers were asked to expedite the construction and deliver the flats. Some problems in the industry are structural, which are being fixed through HRERA. We are trying our best to ensure timelines are met,” said RS Bhath, district town planner.
Dr KK Khandelwal, chairman, RERA Gurugram, said, “Things have been changing fast after RERA started functioning. One can witness the change in RERA court proceedings. We are issuing stringent directions to promoters. Most of the complaints we get are of fund refunds, which is not the solution, but promoters are agreeing to complete the project at the earliest fearing penalty. So perception of homebuyers is changing.”