Some of India’s largest real estate firms such as DLF, Unitech, Omaxe, and Parsvnath, which launched multiple projects at the height of the real estate boom, are now facing pressure from buyers and investors who want to exit these projects.
These developers, already struggling due to the unavailability of bank loans and a decline in sales, are hesitant to comply with buyers who are organizing to demand refunds for projects that have not yet commenced construction.
Frustrated by the developers’ inability to initiate work, many buyers and investors have stopped paying installments on their purchases, further aggravating the companies’ cash flow issues.
Investors in DLF’s commercial projects in Delhi and Kolkata, with the help of brokers, are pressuring DLF to either start construction or refund their initial deposits.
According to the broker, DLF has not even paid the government to convert industrial plots at Shivaji Marg and Okhla in Delhi into commercial plots. However, a DLF spokesman denied this, stating, “We go by the agreement with the buyers signed at the time of booking. The allegations over the status of our projects are not true. We will deliver as per schedule.”
Several projects of Omaxe, Unitech, and Parsvnath are also encountering similar challenges. Akash Verma, a Noida-based garment exporter, booked an apartment each in projects of Omaxe and Unitech in Noida. He booked an apartment at the ‘soft launch’ of Omaxe’s Noida project in May 2007. Omaxe had promised to formally launch the project a few months later at a higher rate. The formal launch never happened, and investors like Mr. Verma are stuck. Omaxe has turned down requests for a refund. An Omaxe spokesman, however, said the company has ‘considered and taken care’ of all such requests.
Mr. Verma has also been unsuccessfully seeking a refund of his investment in Unitech’s Grande project. “I am paying Rs 4.5 lakh as EMI. Unitech executives say the project will be delivered on schedule, but there is no worker at the site,” he says. A Unitech spokesman said, “We generally discourage cancellations. But if the buyers insist, we refund the money after deducting 10-15% of the total value of the apartment.”
Most real estate firms do not encourage refund requests. Until the end of 2007, investors could easily sell their property in the open market as prices were rising. But with buyers disappearing from the market, investors are now forced to approach developers for refunds.
Some property buyers are seeking refunds due to their weakened financial positions, while several others do so because they are uncertain about the developers’ ability to complete the project. There are a few others who seek refunds as they feel that they can strike a better deal now with prices undergoing a major correction.