By Vanita Akhaury
The real estate stalemate that has been going on for long will perhaps clear off quickly much to the relief of the industry people as the Union Cabinet has given its green signal to the Real Estate (Regulation and Development) Bill, 2015.
A key stipulation of the Bill, to ensure timely execution of projects, will go a long way in safeguarding the interest of consumers, and in the long run, keep the real estate markets brimming with active demand.
Of late, the market has been dull, lacking velocity in sales and an umpteen number of projects failing to meet deadlines. The developers have been crying about procedural delays as the major factor affecting the project execution timings.
To put it bluntly, the real estate market has been stagnant. The National Capital Region (NCR) alone has a number of stalled projects because of slow demand and certain economic factors. A Knight Frank report states there are more than 6 lakh unsold units in the country, and at the current absorption rate, it will take more than 2 years to clear even if no projects are launched.
There are reports, however, of some progress. For example, residential sales in Mumbai have climbed up. Ramesh Nair, COO & International Director, JLL India says, “The aggregate of residential unit sale in Mumbai in previous four quarters has jumped up 28% when compared to the corresponding period one year ago.”
In other regions however, sales have been sluggish across the country. According to Surajit Chanda, regional head, Sobha Ltd. (Pune), sales velocity has slowed down in the city. “The market is going through stress. And buyers are taking more time to buy. Primary demand is between 30-70 lakh segment all across the country. In the premium segment, say 1 cr and above, there is certain movement, but not as is expected,” lamented Chanda.
Pinning down one of the causes of the real estate distress, Chanda remarked, “Developers have over leveraged themselves. They picked up more than they can chew.”
If one takes a look at the massive number of delayed projects, it gives a clear picture of why buyers’ confidence is eroded. Not only is their hard earned money been stuck and their economics gone topsy-turvy, but the developer’s promise of timely delivery, a thing which they should swear by, has lost credibility.
The situation could have been salvaged had the developers focused on completing one project before stepping into another. This way they would perhaps have kept rotating capital and gained consumer confidence. By getting into multi-project status, they have been unable to handle the operations of the projects successfully, as a result, on the financial front, they are facing acute cash crunch and many have gone into heavy debts.
The issue has got complicated with an umpteen number of housing units lying unsold in metros. In such a scenario, the nod to the Regulatory Bill 2015 for the consumers is like good tide flowing into the real estate market. Hailing the approval by the Cabinet, Manju Yagnik, Vice-Chairperson, Nahar Group, remarked, “With regulation in place, there will be more housing stock created for development with faster approvals, resulting in projects being completed on time and at a much lower cost to the home buyer.”
In the absence of regulations, the consumer faced a lot of complexities. One, as real estate deal is ruled by massive financial transaction, and for most consumers, it is a once-in-a-lifetime purchase, so for the consumer to judge whether he is transferring money into right hands, and who in exchange for money, will provide him his most expensive purchase - his dream house - was a big question mark.
Second, the problem for the home consumers until now has been that as first-time home buyers, they have to deal with developers who all claim repute in the construction business, but there is no guarantee that the project they are handling will see fruition in a timely and precise manner and going by the printed words of the brochure when sale agreement was made with the consumer.
Third, with no set parameters, and in the absence of regulations, the buyer is left to chance and luck when it comes to house purchase. What is worrisome for the consumers is the fact that whether developers possess the knack to carry out the project completion process smoothly. For the buyer definitely would not like his money to get stuck in a stalled project.
Fourth, any sort of delay in home construction process affects the buyer as well as the developer. The consumer sees it as high-level risk as timely delivery and product quality are two factors he does not want to compromise with. For the developers, the regulatory procedure delays put a burden on them. The situation becomes adverse as their cost is adding up on a daily basis and the market is holding up. The macro-economic environment too, throws a challenge.
So, the message has been very clear. An improved regulatory environment and shorter turnaround time for projects will greatly help in building consumer confidence. And the government is working on that.
With New Year dawning soon and new projects in pipeline, how do the developers plan to push out the older stock and does that mean prices will come down? It will be interesting to watch how the real estate market unfolds. As for now, it’s a buyers’ market, say the experts; hopefully the buyers will rouse now into action, with the Regulatory Bill 2015 as their guardian.
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Updated Date: Dec 14, 2015 08:57:54 IST