The devil is in the delay
As many as half of the project delays in the country occur in the sub- lakh segment and happen because of pending approvals and high input costs
One thing every home buyer dreads is a delay in completion and possession of the property. Even a six-month delay puts considerable financial pressure on a first-time buyer. Not only does he have to bear the cost of rent (if he is staying in a rented home) for the period, the lump sum he has paid as construction cost also remains locked in. Let us look at an example.
Ajay Sharma, a mid-level executive with an MNC in Gurgaon, was staying on rent. Tired of shifting base every couple of years, Sharma saved up over time to book an under-construction property in the Delhi suburb with a 75% loan liability. The developer promised him possession in two-and-a-half years. Construction at the site progressed rapidly for a year before coming to a standstill — nothing moved over the next six months.
Sharma was in a sticky situation. He had already paid 75% of the amount as per the construction schedule and was paying a huge amount for the flat he had rented out. For someone like Sharma, the sixmonth delay put him back by over a lakh.
According to an analysis by CRISIL Real Estate Star Ratings (CREST), the reasons behind the delays include late approvals and clearances among others.
Projects of all ticket sizes are delayed around the country. However, around half of the total delayed projects belong to the sub- R50 lakh segment. These projects are categorised as affordable homes and are targeted at first-time buyers.
While pending approvals, clearances and high input costs have traditionally been cited as reasons for delays, projects these days also remain pending due to reasons like manpower shortage, lack of raw material availability and slowdown in sales.
A majority of projects are delayed due to constructionrelated issues such as change in contractors midway into construction, shortage of raw material and labourers.
Add to that the harrowing ordeal a developer has to go through for getting approvals from the authorities concerned. Funding is another major issue faced by the developers.