Around 1.32% of India’s GDP stuck in delayed under-construction projects: Liases Foras

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NEW DELHI: Of the total residential space under construction across 25 cities around 3.2 billion sq ft around 1.1 billion sq ft or 34% of total is delayed by over 12 months. This delayed space is valued at around Rs 165,064 crore, which is around 1.32% of GDP, according to a report by independent property research firm Liases Foras.

For this calculation, the research firm has pegged the average cost of construction at around Rs 1,500 per sq ft.

Project delays, says the report, are the Achilles heel of Indian real estate and are one of the key reasons for high property prices in many parts of the country.

According to report, the new real estate regulatory bill, once it is cleared by the Parliament, is likely to improve transparency and accountability which will eventually improve efficiency leasing to reduction in delays.

But since the new bill does not tackle the sanctioning process for real estate projects and does not bring into its ambit government authorities that provide approvals for projects, the problem of the real estate sector is only half solved, says Pankaj Kapoor, managing director of Liases Foras.

“While the bill protects consumer interest, faster approvals are also crucial for developers to prevent delays. Against this backdrop, regulatory authorities aim to promote single window system of clearances for real estate projects, wherein the projects and promoters both can be graded along with digitization of land records. However, the bill has a long way to go as far as faster sanctioning process is concerned. Thus, the problem is only Half-Solved,” the report says.

On the positive side, compulsory disclosures and registration that are part of the bill will ensure transparency, while taking responsibility in case of any unwarranted deviations in the process will ensures accountability.

“Together these elements generate efficiency by discarding any kind of deception in prices. Firstly, it may usher sales on carpet area, which is a practice followed in the developed countries including Singapore and UK.

Secondly, the escrow account will help in curbing diversion and misuse of funds, ruling out speculative practices,” the report says.

The report points out that an important element of the bill is the redressal mechanism, addressed through adjudicating officers and Appellate Tribunal.

“Discontented buyers can now approach 644 consumer courts at the district level instead of only the Regulatory Authorities proposed to be established mostly in capital cities. This makes it convenient for buyers and reduces the costs of litigation. Also, the bill marks a provision for imprisonment of builders and real estate agents in case of violation of rules,” it says.

The bill will have a positive impact on the Indian economy as it would provide confidence to foreign investors.

“Indian economy has opened up to the world about two decades ago, and we do want foreign funds to roll in. Thus, it becomes imperative that a global standard is maintained and transactions are monitored by a regulator.

Moreover, project delays are the Achilles heel of Indian real estate and one of the key reasons for sky high prices. As far as responsibility for delay is concerned, it lies both with the developer and the Government authorities. Thus, if we look at the larger picture, the delays in execution also have a negative bearing on India’s GDP,” Kapoor said in the report.

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