GURGAON: During the year 2005-06, Gurgaon was a hotspot for all big and small builders who had promised the ” perfect abode” in less than three years’ time.
However, lack of foresight and a reckless “me-too” attitude by developers led to a large percentage of these projects being delayed for occupancy, say real estate analysts.
“Many of the projects launched in 2005-06 with assurances of possession by 2008-2009, are yet to be completed. Today, as many as 63 large residential projects in the NCR accounting for almost 40,000 units are delayed by over four years,” said Santosh Kumar, CEO – Operations, Jones Lang LaSalle India.
The developers involved represent a mixed bag of large, established players and new entrants into the NCR residential property fray. Analysts highlight that in many projects, including 10 in the NCR which have been delayed by over six years and involve over 9,000 units, possession is being given in phases which may span over several years.
According to Unitech Ltd, “The company has undertaken several measures to ramp up the construction activities as well as to reduce the construction time. Possession occurs in a phased manner.”
For instance, in the project, “The Close (North)”, over 500 people are already living in the 14 towers where possession has been given. For others like “The Escape” and “Harmony”, the possession is already under way in a phased manner.
Going by reports, The Close (North) project was launched in 2005 and though possession has been offered in 14 of the 16 towers, two towers still remain incomplete, even seven years after its launch. The situation is similar in other Unitech projects like The Escape and Harmony, and the buyers find themselves helpless because many of them have paid almost 90-95% of the overall amount to the builder within three to four years of the launch, while possession is elusive even seven years later.
This is due to the construction-linked payment (CLP) plan being lopsided and biased against the buyer where the buyer usually ends up paying as much as 90-95% of the overall cost to the builder when the project is barely 50% complete.
The instalments in the CLP plan are generally linked to the construction of the structure of the building and not to the progress of interiors and the finishing. The builder, who demands instalments depending on the stages of construction of the bare structure, collects almost 90-95% of the total price of the apartment, while having spent only 40-45% on construction, according to analysts. Now, the builder has all the money, and has to spend it on the interiors.
This is where they are most tempted to delay because the penalty to be paid by the builder per year for the delay is only 1% to 2% of the amounts already collected from the buyer. In many cases, the penalty for delay in projects may even be denied altogether to the buyers, especially in projects which lie in the areas under the new master plan.
According to a recent report by Jones Lang LaSalle, India, projects like Vedaanta (2007 1st quarter), Navodya (2007 2nd quarter) and Atharva (4th quarter 2007) by builders like Raheja Developers have been delayed by almost two years, but the realtor maintains that none of these projects has been delayed.
The developer maintained that the delay in possession is because of the slow development of infrastructure in these new sectors by the government and its nominated agencies, which according to the agreement signed with the buyers exempts the developer from having to pay any penalty.
According to an official statement by Rahejas, “Our construction is much ahead of schedule. However, we are limited by the unavailability of necessary infrastructure in the area which was to be developed by HUDA, so it has been an impediment to giving possession of the projects. We would like to inform you that the structure of the buildings has been completed and the internal work is nearing completion.”
The developer added that “For a place to be adequately habitable, we primarily refer to the availability of basic infrastructure comprising road connectivity, sewage system, water and electricity connection, etc. Regarding the peripheral development, our teams are regularly doing follow-up and pursuing with the government to make the same available which will enable us to give the possession of the projects….”
The developer also added, “If we rush to hand over the project at this stage the warranty of all the equipment installed will start as also the EMIs of the customers, which will be more detrimental to the interests of our customers.”
Meanwhile, a look at the figures for these incomplete projects reveals that a large number of them are in Gurgaon and Faridabad, while Noida and Ghaziabad present a better picture. “Almost all of these developers claim that they will deliver possession in 2012. Nonetheless, construction has been going on for four to six years if we consider December 31, 2011, as a reference date,” added Kumar of Jones Lang LaSalle India.