For many buyers, the joy of receiving possession of their homes is fast turning to dismay as they cannot rustle up the finances for relocation - that too in cash. Builders too are citing demonetisation and the subsequent labour crunch as reasons for delay in projects getting completed on time.
Santosh Kumar, who received delivery of his Greater Noida West apartment earlier this month, says he cannot move in before April because he does not have cash for the movers and for other expenses. His project is one of the many housing societies where even though 1,300 people have registered their apartments, only about 500 people have moved in.
Shweta Bharti, general secretary, Noida Extension Flat Owners Welfare Association also confirms that some developers are citing demonetisation to justify the slowdown in work and late delivery of projects - but orally. No letters have been sent to buyers. “Whenever we visit the construction site and inquire about the progress in work, we are told that the cash crunch and lack of labour has delayed work,” says a buyer.
Out of 50,000 houses that were to be delivered by end of this year in Greater Noida West, only 12,000 have been handed over formally.
Unorganised labour from Bihar and Madhya Pradesh hired by developers on a short term basis have gone back to their states due to the cash crunch. Usually, a project site has 15% permanent labourers and 85% temporary labour who do not have bank accounts have gone back to their homes. This has had an impact on project construction and led to delay in delivery of projects, says Praveen Jain, president of Naredco.
“Builders were under pressure to complete projects before the real estate regulator is put in place across states and were hoping to complete them by February next year but demonetisation will lead to further delays. If projects were delayed by a year to three years earlier, they will be further delayed by six months to a year due to cash flow issues,” Jain adds.
Amit Modi, wholetime director ABA Corp and vice president Credai Western UP, says that there has been a 25%labour shortage.Labourers whose accounts could not be opened due to lack of proof of identification papers have gone back home and that is causing delays in project delivery. His company has taken the initiative to open bank accounts for workers and even decided to provide them daily meals.
What should home buyers do now?
Uncertainty in the market: People planning to invest in property are currently in wait-and-watch mode due to uncertain sentiment in the market. Many of them are still checking out the market, just to feel the pulse, and expecting big discounts by developers desperate to sell
Price guarantees. Some builders are trying to assure buyers that if prices were to correct, the difference would be returned to them or adjusted. They have been handing out either promissory notes or including a clause in the builder-buyer agreement to this effect. Buyers should be aware that the market has remained stagnant for almost two years now and some markets have already experienced price correction
Check the size and the penalty clause: Buyers should check the size of the property they’re investing in - as over the last few months some builders are claiming to offer slashed prices but tweaking the size of the apartments. As far as possible, buyers should opt for a ready-to-move-in project rather than a new launch.
Penalty for delays: A builder promises penalty for delays but buyers should understand that this is much less than the amount of EMIs that they would have to pay to the bank to service their home loans. Buyers are advised to read the builder-buyer agreement carefully, especially the force majeure clause as some builders could use demonetisation as an excuse to delay projects