So, the only option they now have is to complete projects. Because this is the only way buyers would be encouraged to start paying their dues.
Manoj Gaur, MD of the NCR-based Gaursons India Ltd, said delay in possession has affected market sentiment and hit the sector badly and the only solution is to give possession as early as possible. But, for this, developers will need funds, which is not easily available right now, Gaur said.
“The situation is so bad that now contractors are asking for money in advance to restart work,” a developer, who is facing an uphill task completing a project in Noida, said.
Some builders are trying to rope in private equity funders, who provide funds through quasi-equity instruments. But even these entities are not very keen, as a large number of flats was sold at very low rates -around Rs 1,800-2,500 a sq ft -in Noida Extension, which has affected the profitability of developers. In other parts of the NCR, too, the going rates are so low that making money is difficult.
Quasi-equity is an instrument which gives investors buyback arrangements at predetermined prices, assuring them a certain return. In most of the cases, private equity players ask for astronomically high returns -in the range of over 25% -on their quasi-equity instrument and, there too, with impractical clauses like personal guarantee on returns, Gaur says.
Facing the wall, developers are even trying to sell their land holdings or unused construction rights (FSI), but there are no takers, as the market sentiment is bad. In these circumstances, developers are trying to part-complete a project, to prompt buyers to start paying their dues.
Anil Sharma, CMD of Amrapali, said when people start getting possession, the sentiment will automatically improve and buyers will pay their dues, which will expedite work on other incomplete towers in a project.
Manoj Gaur, who is also the president of Credai (NCR), said the Noida and Greater Noida authorities have agreed to give part-completion certification so that developers can give possession to buyers in those units.
R K Arora, CMD of Supertech, said constant dialogue with customers is important to improve sentiment. “Though developers are not solely responsible for the delay, we are solely answerable to customers,” Arora said.
Many of the large developers have adopted new techniques like “prefab” and “aluminium shuttering” in construction to expedite delivery of projects. Anil Sharma of Amrapali said his company can now deliver over 9,000 apartments every year, with the help of these new techniques.
Supertech, too, has embraced the new technology in its mega 89-floor residential-cum-mall project Supernova, which is on schedule. Arora said they have completed construction up to the 50th floor using ‘jump form’ technology.
Most of these developers also underlined the need for the availability of bank finance. Banks can fund a project, taking unsold units as collateral from developers, Anil Sharma said.
However, a senior banker said this is a difficult proposition, considering the present business environment and also RBI’s aversion to risk.
Credits ET Realty