Delivery Delays Plague Indian Real Estate Market in 2013
Homebuyers eager to settle down this year face prolonged waits as developers grapple with delivering committed units. Surveys indicate that in 2013, developers are, on average, delivering one-third or fewer of the promised units.
Regional Disparities in Project Completion
The National Capital Region (NCR) is significantly underperforming compared to other major cities. Data reveals that only 24% of units were delivered by September, with over 25% of the committed supply remaining undelivered. Southern India exhibits a more robust market compared to its northern counterpart.
Specifically, Gurgaon's market hit ratio stands at one-third, while Noida falls below 20%. Meanwhile, Pune and Mumbai are considerably ahead, delivering 40% of their committed supply for the year.
Reasons Behind the Delivery Slowdown
While homebuyers generally accommodate minor delays attributed to genuine developer issues, the current situation presents more significant challenges. Some of these issues are self-inflicted by developers, whereas others are beyond their control.
Several factors contribute to these delays. Primarily, developers face a shortage of capital, compounded by equity firms' apprehensions regarding the Reserve Bank of India's (RBI) 80:20 schemes. Furthermore, over-leveraging by developers who borrowed heavily to acquire land has backfired amidst the market slowdown and rising interest rates, draining their cash flow and hindering construction progress. Land availability and inadequate approvals from relevant authorities constitute additional roadblocks.
Other contributing factors include escalating land prices coupled with rising input costs and currency depreciation, further exacerbating delivery slowdowns.
Impact on Homebuyers and the Market
These delivery delays impose additional financial burdens on homebuyers. They continue to bear ongoing EMI payments and incur additional expenses until the unit is finally delivered.
The local market plays a crucial role in the growth of the real estate sector, as most housing demand is concentrated within or near local areas. Notably, large projects in smaller towns encounter obstacles due to slow inventory movement.
Resale Market Offers Opportunities in Current Climate
Amidst these challenges, the resale market presents a potentially favorable avenue, particularly for end-users. Investors have been significantly affected by the current subdued demand and high interest rates. Currently, end-use buyers are the primary market participants, and the situation appears promising for them.
"Most buyers have budgets for delay of a few months for some genuine problems faced by eth developer. But this time around the developers are facing many problems some are being created by the developer and some are out of their control."