Lost hopes: Over 1 lakh buyers await dream houses in Gurugram
It is estimated that across Gurugram, flats of over 1 lakh buyers are delayed, by three to five years.gurgaon Updated: Jul 06, 2018 14:21 IST
Despite having paid Rs70 lakh for his three-bedroom apartment in 2010, there is no assurance that 32-year Itender Singh and around 500 other homebuyers in the project would get their houses any time soon.
The construction work at Universal Aura project in Sector 82 has been stalled for the last three years despite complaints at all forums, including the police.
Eight years after Singh signed up to live in Gurugram, his apartment is not delivered and infrastructure in new sectors is yet to be set up.
The administration has not been able to provide water pipelines, construct internal roads or provide adequate power infrastructure, allege residents, who have got possession so far.
It is estimated that across Gurugram, flats of over 1 lakh buyers are delayed, by three to five years. “I have lost hope of getting the apartment despite pursuing the matter with authorities, police and in the court. There is no solution as the developer admittedly has no money, ” said Singh.
According to the government’s Gurgaon-Manesar masterplan, development of the area was planned for 2031. Buyers question why licences were issued to developers for delivery in 2015 and why the plan has been revised thrice.
The only consolation for buyers like Singh is that the developer is still in business and has promised to find a solution. However, for homebuyers and investors who bought projects sold by Unitech, Adel/Landmark, Pal Infrastructure, Earth Infrastructure and several such developers, the hope of getting relief is little as promoters are either facing criminal charges or projects are mired in court cases.
“I paid Rs 35 lakh in 2013-14 to buy an apartment in a project launched by Adel in Sector 103 but no work has taken place. The company forced us to pay money and several people paid with their retirement benefits and savings, money for their daughter’s wedding and to educate their kids. I don’t think I will be alive to see the delivery of my flat,” said 70-year-old Vedpal Bakshi.
The predicament of buyers, who have approached all forums to seek justice, is also shared by market players and consultants, who admit delivery is the key to bring life back to the city’s real estate.
Data released by Anarock real estate consultant reveals that developers in Gurugram were not able to deliver around 19,400 units in 2017 and the delivery of these units was postponed. Of 27,300 units that were to be delivered in 2017, only 29% were handed over to buyers and around 14,400 units (53%) are to be delivered by 2018-end. Altogether, developers in NCR are expected to deliver around 1.66 lakh units (3.9 times the units delivered in 2017) by the year-end.
“What about the units that were to be delivered in 2018? The entire industry has been caught in a web of its own making. Buyers have been duped, investors stuck and there is no escape route, ” said Sanjay Sharma, a real estate consultant.
An analysis of data made available on the department of town and country planning website reveals that of 172 projects along the Dwarka Expressway, more than 120 are delayed. Of the 70 on the Southern Peripheral Road (SPR) and Golf Course Extension Road, almost half are in various stages of construction, but the situation is slightly better in terms of delivery.
“The apartments, the expressway and internal infrastructure all are delayed. In fact, the state has failed the people, who have nowhere to go. Even residents who have got flats find it difficult to survive without amenities,” said Prakhar Sahai, an executive member of the Dwarka Expressway Welfare Association.
The situation has worsened to such an extent that the officials of the Haryana Real Estate Regulatory Authority (HRERA) were mobbed twice in the last five months by disgruntled buyers to seek justice. They also forced the authority, for the first time, to set up an emergency court that promised to help, but the pace is slow and the process is tedious, say buyers.
What went wrong
Real estate experts, property dealers and regulators said the primary reason for the delay is a diversion of funds for other projects and investments, tweaking of norms to bypass regulatory clearances and environment rules, which was accentuated by the government’s tedious licensing policy and lax monitoring.
“Consumer sentiment was severely shaken by these delays and finally brought the sector to a standstill. Developers’ profits took a massive hit and their negative cash flows made the delays longer,” wrote Prashant Thakur, research head, Anarock real estate consultants.
Ramesh Menon, CEO, Certes Realty, blames the then government and developers equally for the mess. The roots of this prolonged slowdown go way back to 2006, when the Gurugram masterplan was released, and projects were launched in 2007.
“The entire plan was real estate driven, with maximum focus on licensing the farmland so that projects could be sold. Anyone who had land or money was allowed to enter the real estate sector, irrespective of the capacity or experience and the result is there for all to see, ” said Menon.
Another major folly during boom years was that real estate projects were marketed as financial products with the promise of endless speculation and quarter on quarter growth, say experts. “There is no liquidity in the market; new projects are not selling and there is no exit option for buyers and investors,” said Pankaj Tomar, a property dealer.
To facilitate unregulated urbanisation, the government also revised the Gurugram-Manesar masterplan thrice from 2006 to 2014 with the sole purpose of delivering more land to developers.
The enormity of this exercise can be gauged by the fact that during these eight years, over 18,000 acres was licensed to developers for residential use without looking to into the actual demand and supply on the ground, as per information available on the website of the department of town and country planning (DTCP).
In comparison, the DTCP gave licences for a minuscule area 367 acres for residential purpose in the last four years.
Experts said that laxity of the government allowed developers to raise money against unsold inventory, but they failed to factor the risk of oversupply. Money paid by buyers was diverted by developers, who took risky bets, bought land as far as Coimbatore and Mumbai, and some even announced countrywide expansion but shunned the plan after a loss.
“Shell companies were used to divert cash, land banks were created and projects launched. But the business environment does not remain the same and the irony is that none could see the inevitable slide,” said Sharma.
The role of banks
While banks played a key role in financing the real estate boom in Gurugram, they also ensured that buyers’ credit or loan repayment ability was monetised to ensure that developers continued to sell apartments even if the projects were not viable, irrespective of the promoters’ track record.
This ensured that banks and builders had insured themselves against defaulters, but buyers bore the risk, as they are forced to pay the EMIs despite no work taking place on their project.
“I bought an expensive low-rise floor from Unitech in 2010, but it is yet to be delivered. The money which was to be kept in an escrow account was diverted. The bank gave a loan to developer for the project, but this was also spent elsewhere. We complained to the bank, its CEO and even the ombudsman, but did not get a satisfactory reply,” said Vibha Batra, a city-based professional, who bought a floor in Unitech Espace project.
The general perception is that while the banks took a liberal approach in the boom years, they are shying away from the market, bringing it to a halt.
“The majority of projects in Gurugram are delayed as lending norms have become tight and developers face funds crunch. This is a chicken and egg situation, as no work is taking place. Buyers are also refusing to give money and it has led to a stalemate. Money is needed now to revive the sector, ” said a promoter of a Gurugram-based real estate company.
Industry insiders said that almost 75% of the money is coming through private equity, which is more expensive than bank loans. “This is increasing the cost for builders, but it has also ensured that they execute the promises,” said Menon.
Rajat Gupta, managing director, advisory and transaction services, CBRE, however, said that developers with a good track record and sound corporate governance practices are getting funds. “There is no doubt an ongoing liquidity crisis, but there are several players in the housing finance sector, who are ready to provide funds, provided the quality of the product is good,” he added.
A spokesperson for Unitech said, “The matter between the buyers and developers is subjudice and the directions of the Supreme Court will be followed in letter and spirit. We are making all efforts to ensure that the projects get delivered and work on projects which are stalled be resumed. Also, licences of projects are getting renewed and various options are being considered to ensure delivery. We have also handed over apartments on as-is-where-is-basis to some of the buyers”.
Universal Developers and Adel were not available for comment.
Consolidation is the way ahead
While the government has set up HRERA to ensure recalcitrant realtors are made to deliver, the industry itself is looking for answers to find a way out of the situation. “Soon, the market is going to witness large-scale consolidation in the industry, with several smaller players either selling out or collaborating with bigger players. They have now understood that real estate is not about licensing but about the building. I have received four to five such proposals and am analysing the same,” a leading developer said.
Anuj Puri, chairman, Anarock Property consultants, said that dubious players are likely to be pushed out of the market due to the crackdown on black money and benami transactions.
Due to RERA, many small businesses may not be able to manage the requirements and may choose to exit. “We are likely to witness a massive consolidation of real estate businesses in 2018. This will include all stakeholders of the real estate sector, including developers and real estate consultants. Post cleansing of the system, only good players with the right business intent will continue to operate,” said Puri.
Industry experts said that bringing back normalcy will be a painful process and could take few years. “The setting up of HRERA is a positive step and it will bring accountability and transparency to the system. The developers are focusing on completion of projects and handing over possession. No new launches have been announced and the industry is learning from experience. Things are going to improve hereon,” said Ashutosh Limayae, research head, (Jones Lang Laselle) JLL.
Industry lobby group National Real Estate Development Corporation (Naredco) also said that the situation is grim, as far as delayed and under-construction projects are concerned, but it wants the government to come up with clear guidelines to facilitate the takeover of stuck projects.
“Developers are ready to take over projects that are stuck but a transparent system is needed to facilitate it, as there are several issues concerning penalties and demands by buyers and government. Who will pay for that?” said Praveen Jain, president, Naredco, Haryana.
Even as industry figures out consolidation, the government is trying to improve regulation and enforcement. “In the last two and half years, several meetings of the AGRF were held and developers were asked to expedite the construction and deliver the flats. However, some problems in the industry are structural, which are being fixed through HRERA. We are trying our best to ensure timelines are met, but in some cases, the matter is in court over which we have little control,” said RS Bhath, district town planner.
It is quite clear that the real estate industry is trying to realign and reconfigure itself by trial and error, but until then, buyers will have to weather the storm.
First Published: Jul 06, 2018 14:07 IST