New Delhi / Bangalore: Home sales in India may be on the rebound, with real estate firms launching new projects to tap a revival in housing demand, but Ajay Jain remains an angry customer of DLF Ltd, the country’s largest property developer by sales.
Singapore-based Jain, 49, who signed up in August 2006 for a four-bedroom apartment in DLF’s Belaire project in Gurgaon, a satellite town south-east of New Delhi, is upset that he has paid the developer at least 85% of the cost of the flat—Rs2.4 crore—but only half the work has been completed so far at the site.
Tall claims: The DLF Belaire project in Gurgaon. Only half the work has been completed so far at the site.Rajkumar/Mint
At the time of booking, Jain said, he was told that the project would be completed in three years—by August 2009. After paying two-three instalments, DLF gave Jain the buyer agreement in February 2007, which said that possession would be given within three years of signing the agreement.
“Though DLF has collected the money for this project, they are not bothered about completing it and instead, they keep investing in other projects,” Jain said in a phone interview with Mint. Belaire is likely to be delayed by 15 months, say real estate consultants.
Buyers such as Jain—those who bore the brunt of the downturn along with developers—are in plenty. Since mid-2008, projects of almost every developer across cities have been stuck, delayed or shelved. Average delays have ranged from six months to a year.
But what irks buyers even more now is that while several existing projects are stuck mid-way, developers have started launching new ones. These projects, mostly in the budget range, promise possession to buyers within two years, yet there are few signs that the pace of construction at existing, delayed projects will be accelerated.
DLF declined to comment as it was in the mandatory silent period ahead of its first quarter results, likely to be released later this month.
In November, the company’s chairman K.P. Singh had said its assets under construction spread over hotels, residential and commercial projects were delayed because of lower demand and an industrywide liquidity crisis.
DLF’s Belaire and Park Place projects in Gurgaon are likely to be delayed by 15-18 months, say consultants. Belaire was to be ready by August and Park Place by October. A visit to the sites showed that both projects are far from completion. At both sites, only the structure of the towers are ready. The DLF website reflects as much: Structural work is in progress both at Park Place and Belaire, it says.
With these projects lagging, DLF launched 2.8 million sq. ft of residential projects in the first quarter of fiscal 2010, compared with 2.1 million sq. ft launched during the first quarter of fiscal 2009, according to a July report by Motilal Oswal Financial Services Ltd, a brokerage firm.
This is true of other developers, too, who have launched new projects—mostly in the budget or affordable housing category—to generate cash flows even as their existing projects await completion.
According to Motilal Oswal, real estate developers, including DLF, Unitech Ltd, Indiabulls Real Estate Ltd, Puravankara Projects Ltd and Housing Development and Infrastructure Ltd, have launched 36 million sq. ft of residential space in the quarter gone by, compared with 2.6 million sq. ft in the year-ago quarter, across cities such as Mumbai, New Delhi, and its suburbs, Bangalore, Chennai and Hyderabad. Of this, developers have already sold 44%, or 16 million sq. ft, of homes.
Unitech’s Fresco, Escape and Harmony projects, all within a 300-acre township, Nirvana Country in Gurgaon, look delayed as well.
According to Unitech’s website, Escape and Harmony are to be delivered in the January-March quarter of 2010 and the first phase of Fresco is expected to be completed by the last quarter of 2009.
But during a visit to the Escape construction site last week, site workers said construction had just restarted after a lull and it would take at least a year-and-a-half to finish the project.
At Escape, only the structure is ready, but the landscaping within the project is still not done.
Arvind Panwar, a buyer at the project, is visibly worried. He had bought a three-bedroom apartment in Escape for around Rs1 crore in July 2006. He had opted for a down payment plan, paying 95% of the cost of the flat at one time in return for a 10-11% discount on the base price of the flat (parking slots, club houses and other amenities are typically charged extra).
Panwar, 35, who works with a tech firm in California, US, feels weighed down by loan instalments of around Rs70,000 every month.
“I am worried because I am paying my (loan) EMIs regularly, but there is no clarity on when the possession of the apartment will be given,” he said. EMI is short for equated monthly instalment.
Panwar’s buyer agreement says the flat would be delivered within three years—a deadline that matures next month. “The penalty for delay that they have said they will pay (Rs5 per sq. ft per month) is nothing compared with the EMIs I am paying,” he said. “I have been getting lots of emails from Unitech and brokers on the new projects they have launched. I get frustrated when I see those mails.”
Unitech had not responded to Mint’s queries on email and text messages until late Wednesday.
In Mumbai, with five projects still at various stages of construction and far from completion, local realty firm Neptune Developers Pvt. Ltd has launched two more this year.
A 125-acre affordable housing project was launched in March near Kalyan, about 50km north of south Mumbai, and an upmarket, 30-storey twin tower project in Bhandup, a northern suburb of the port city, in April.
The developer is clear about the urgency to do so. “One needs to run the show and for that, one needs to keep adding cautiously to one’s portfolio even when times are not that good. We are only launching projects that will sell and ensure cash flow,” said Nayan Bheda, managing director of Neptune.
The firm has sold 2,000 of 2,100 apartments in its budget housing project at Kalyan, said Bheda, and expects the development at Bhandup, priced at Rs5,000 a sq. ft, to sell out,too. The quantum of sales at the Kalyan project could not be independently verified by Mint.
A realty consultant seconds Bheda’s candidness. “Some developers are launching new projects in a particular price category to ensure cash flow to fund construction of its delayed, existing projects even at a lower profit margin,” said Ashutosh Limaye, associate director (strategic consulting) at Jones Lang LaSalle Meghraj, a property advisory.
Construction at Neptune’s projects running behind schedule has picked up after slowing down, Bheda said, without giving any more details.
It doesn’t help, as a spokesman for Parsvnath Developers Ltd said, that realty firms see further liquidity pressure as buyers at older projects default or delay their instalments due to the developer.
Bangalore developer Brigade Enterprises Ltd has nearly 20 projects at different stages of construction, each of which is lagging behind by at least six months from completion dates expected earlier, M.R. Jaishankar, chairman and managing director of the company, said at a press meet earlier this month.
The Brigade Gateway-branded luxury apartments project in north Bangalore, for instance, is at least 10 months behind schedule and several blog sites on the Internet are flooded with complaints on the delay from customers there. The company has plans to enter the budget housing segment.