From ET Realty
NEW DELHI | MUMBAI | BENGALURU: India’s realty developers, never known to be sticklers about finishing projects on time, have decided to become more realistic about the completion deadlines they promise home buyers. This comes as Unitech’s top management was forced to spend a night in jail earlier this week after being taken to court for multiple delays in delivery.
Builders are telling purchasers that they will take up to five years rather than the three that’s always promised but almost never met as the pain of consumer activism begins to bite. Completing a housing project in 36 months is nearly impossible, they said. “No one has done it three to three and a half years is almost impossible,” said Arjun Puri, director of Gurgaon-based Puri Constructions.
The delays occur because securing approvals isn’t easy. “The multiplicity of approvals fire, environment, occupancy certificate takes time,” he said. “To be careful, we are now saying 48 months.” We’d rather deliver within the timeline than get the reputation of being delayed.”
India’s largest listed real estate company DLF has increased the delivery schedule to 48 months from 36, keeping in view the multiple approvals required and a shortage of execution capacity in India, said Rajeev Talwar, chief executive officer. “This also hedges builders against a lot of litigation that comes with delays.”
Delays lead to litigation and consumers losing confidence in the brand, with many having pitched in a large part of their savings and taken substantial loans to pay for homes. In most instances, they are making mortgage payments and shelling out rent as well.
The data suggest delays are endemic. Around a third of more than 25 lakh apartments launched between 2008 and 2014 were delayed by at least a year, according to property research firm Liases Foras. Consumer ire against builders has peaked in the last few years as long delays have dogged the industry.
Home buyers have complained to the National Consumer Disputes Redressal Commission (NCDRC), state-level consumer commissions, the Competition Commission of India (CCI) and even filed first information reports with the police where fraud was involved. The CCI complaints were based on abuse of dominant status in a particular property market, such as DLF in Gurgaon.
Earlier this week, the chairman, two managing directors and a director of Unitech were jailed after a Delhi court dismissed their bail plea in a complaint filed by home buyers. They were later given bail.
Mumbai builder Paradigm Realty, which had a standard 36-month contract with buyers, recently started adding a 12-month buffer for any unforeseen event that cannot be controlled by the developer.
“Consumers don’t expect houses being built in a year,” said Parth Mehta, managing director of Paradigm Realty. “They also know that there are a lot of other entities involved in building a project. They expect an update and constant communication along with transparency.
We are updating customers on a monthly basis with photographs of completed construction levels. We are also creating a You Tube link to offer them live feed from the construction site.” Noida-based ATS Group is in the process of extending its timeline to 48 months. Tata Housing has always had a flexible timeline for possession in its contracts. Depending on the size and complexity of the project, it varies from 36 to 60 months.
A spokesman for builder BPTP in Gurgaon said timelines have been revised to 48-54 months in most of its new projects. “The market realities today are such that it is difficult to complete in 36 months. This is a learning for us,” he said. Vinod Menon, CEO of Bengaluru based Citrus Ventures, said his company has added another nine months to the existing completion timeline of 36 months. Unitech is said to have extended the period.
Puri of Puri Constructions said the delay was actually good for customers as they get more time to pay their installments and that many had been asking for this. He also said that his company would pay the same penalty for delays in possession as it charged for payment delays by buyers, if it failed to deliver in the extended timeline.
Talwar of DLF suggested real estate developers overhaul current selling practices: “Let the industry and government consider this: Why not allow the launch of any project for sale only after the superstructure is ready? It is done for commercial projects, why can’t we do it for residential too?” DLF is contemplating such a move.