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

Delay in Handing Over the Possession of Homes to End Users!

Have you booked a home and been promised delivery in the 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 EMIs as per the delivery schedule 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 has become the latest trend. Looking 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 lakh homes that were supposed to be delivered this year in the Delhi NCR region have failed their commitments, and delivery certainly does not look near for the next two to four years.

As per the analysis made by Prop Equity:

• Ghaziabad and Noida homeowners face an average delay in delivery of 30 months.

• Gurgaon’s delivery schedule runs behind by 34 months.

• Faridabad scores the highest in delay, with an average of 44 months.

• Pune and Mumbai have fared better, delivering approximately 40% of the projects as per schedule.

• PAN India, almost 25% 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. When asked for the reason, they mostly cite factors beyond their control.

Primary Reasons for Delays

• Proceeds Used to Buy Land
  The proceeds deposited by customers as a token towards the purchase of residential units are instead used to buy land for other projects and for marketing those projects. As a result, brochures and marketing materials are printed using these proceeds, while the actual construction has not even begun.

• Cumbersome Approval and Permissions Mechanism
  A project has to undergo a series of approvals from both central and state governments, leading to major delays in starting the project. These approvals and clearances may take up to 2-3 years, proving to be a major hindrance in keeping up with the committed delivery schedule.

• Unplanned Market
  The real estate market is largely unregulated, requiring several stakeholders to come together without proper regulations to achieve construction targets. This often results in disputes, conflicts, and other issues, leading to delays.

• Liquidity Crunch
  Banks and financial institutions lack adequate mechanisms to provide sufficient and long-term loans that match the tenure of real estate projects. Builders are forced to borrow at high-interest rates or face liquidity crunches, leaving them with little scope for construction progress. Non-availability of credit at cheaper rates and for the required duration remains a major contributor to untimely project delivery.

Lack of Structured Grievance Redressal System

Since the real estate market is highly unregulated, there is no structured grievance redressal process, leaving buyers with few options other than waiting endlessly. While legal recourse is available and often results in favorable judgments for buyers, the system remains ill-equipped and under-regulated to offer complete consumer protection in real estate matters.

As awareness increases, buyers are now more willing to take legal action. For example:

Case Study: Mr. Suresh Kumar, residing in Phase 3B1, SAS Nagar, Chandigarh, took legal action against K Soni Builders and Promoters (P) Ltd for the delay in delivering the residential unit he had booked in KSB Royal Heights, SAS Nagar, which was scheduled for delivery in December 2012. The district consumer disputes redressal forum ruled in his favor, directing the builder to pay Rs. 50,000 as compensation and another Rs. 11,000 towards litigation expenses.

While customers file complaints, some builders, like BPTP Ltd., continue to thrive despite complaints and delays. According to 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.

• Despite these profits, the company defaulted on its loan repayments to three banks for up to three months in the quarter ending March 31, 2013.

• Ironically, the owner of BPTP owns a $19 million super-luxury apartment in New York, while his company faces consumer ire over delivery delays.

The Way Forward

There are several loopholes in the real estate market, and significant measures are needed to help buyers get ownership of their dream homes on time. Some possible solutions include:

• A professional approach by developers and the industry as a whole.

• Proper utilization of funds instead of diversifying into other projects.

• Easier availability of credit for builders.

• Better circulation of funds through foreign capital inflow.

• Reduction in interest rates to ensure a stable and streamlined real estate market.

About the Author

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

Smart Homes is a professionally managed organization specializing in affordable group housing and town planning projects in India. The company aims to build more than 100,000 homes in the next decade. With a team that boasts over 200 man-years of experience in group housing development, Smart Homes has successfully sold over 80 million square feet of housing projects across India.