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

HT Estates - - Front Page - Sachin Nigam

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.

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