Most homebuyers would not mind a housing project being delayed by a few months. What is worrying though is that a large number of residential projects in the national capital region, launched in 2005-06, and to be handed over to buyers latest in 2008-09, are still under construction.
A research done by property consultancy Jones Lang LaSalle shows that as many as 63 large residential projects in the NCR, with over 40,000 apartments, are delayed, many by over four years.
Of these, nine large projects with a total of 9,000 apartments have been delayed by over six years. These include four projects of Parsvnath Developers, with 2,600 apartments, and one each of DLF (Belaire), Jaypee Group (Jaypee Greens), Ambience Group, BPTP and AEZ.
“A number of these delays have been due to a lack of initial capital with the developer at the start of the project, hasty and unplanned launches, inefficient project management and issues of land acquisition,” says Santhosh Kumar, chief executive officer, operations at Jones Lang LaSalle India. A number of developers have suffered also because they faced cash-flow problems while they were in the middle of a project, delays in procurement of materials.
In the last few years, real estate developers have suffered because of high cost of debt that has increased they interest payout, banks reducing their exposure to the sector and rising cost of construction. The average cost of debt for the sector has gone up from around 12% to 15-16% today. In the last one year, labour cost has jumped 40-60%, while steel and cement cost has gone up by about 30-40%.
Developers say funds are hard to come by, costs have gone up and mobilising labour is getting difficult because of the success of the government’s rural employment guarantee scheme, MNREGA, which is delaying construction.
A large number of projects that are delayed are in Gurgaon and Faridabad, while Noida and Ghaziabad present a better picture, says JLL.