The brief detention by the police of three top executives of leading developer Unitech Ltd in a case of alleged cheating is only the latest in a series of troubles hitting India’s real estate industry, in which both builders and consumers have been hurt. Respected names like Unitech and DLF are being dragged to the courts and tribunals by angry consumers upset over delays in the handing over of property. On the other hand, realtors have been stuck with unsold inventory or unviable projects as they cope with a prolonged demand slump linked to high interest rates.
For an industry that relies heavily on banks for both building loans and consumer demand, that is understandable. But unacceptable delays have led to serious difficulties in many cases.
The global financial crisis of 2008 came amid a heady boom in real estate in India, and the bets taken then by builders and investors on the decades-old belief that property prices can only go up have rattled the sector. For many builders, putting consumers on hold has been an easy way out, irrespective of the merits of specific cases.
Growing consumer awareness and a culture of shaming or suing builders is, however, turning the heat on builders. Anecdotal evidence suggests unfair diversion of sales proceeds into unrelated ventures.
The reworked realty bill, set to be introduced in Parliament, should ease some of these issues by bringing in transparency and accountability, but perhaps it is time for the government to clear pending problems. The budget next month may be a good opportunity to offer incentives that may bail out realtors and cushion bankers. An early passage of the realty bill may be a long-term boon.
Realtors, meanwhile, would do well to get real on the demand crunch and scale back ambitions and avoid practices that may land them in courts or prisons. Ready-to-move-in apartments are gaining currency in markets like Delhi and Bengaluru. One new report says new launches in the top eight property markets across India declined 11% in the October-December quarter of 2015 from the previous quarter. Hopefully, these are signs of maturity among builders.