Bengaluru/Mumbai: The year 2017 belonged to homebuyers. They brought sales to a near halt, pushed developers to recalibrate project specifics and pricing and also dragged real estate firms to court over breach of trust and unkept promises.
It helped that they were backed by a favourable judiciary and an evidently pro-buyer regulatory regime under the new real estate law—Real Estate (Regulation and Development) Act, 2016 or RERA—even as the sector marked its fourth consecutive year of slowing sales.
“Consumer interest is top of the mind of courts and the government as they collectively protected the interests of homebuyers against developers. As agitations became stronger, some rightfully and a few not, in fairness, defaults have risen and developers are to be blamed on most occasions," said Niranjan Hiranandani, chairman and managing director of realty firm Hiranandani Communities.
Insolvency proceedings were launched against prominent developers such as Jaypee Infratech Ltd and Amrapali Group while two promoters of Unitech Ltd, once India’s second largest realty firm, were arrested over allegations of fund diversion. More developers are likely to come under the scanner as Indian homebuyers’ interests take precedence, said property analysts.
Chitra Sharma, who filed a petition against Jaypee Infratech, had booked a flat in 2010 in one of the latter’s projects, which hasn’t been delivered yet. Along with 32,000 other homebuyers, she filed a public interest litigation (PIL) in August against the company, demanding compensation along with delivery of the flat. Earlier, she had also taken the developer to National Consumer Disputes Redressal Commission (NCDRC) over the delay in possession.
“…I have put my life savings there. I want people to act in our interest and sadly enough, that is not happening. The Supreme Court is taking our side and now at least they are listening to what we are going through, but any regulation till the time you don’t implement it, is just words," Sharma said.
A 29 November report by Liases Foras Real Estate Rating and Research Pvt. Ltd shows that sales across Tier I cities declined with Chennai leading the slump at -13%, followed by Kolkata at -8%, in the July-September quarter compared to the preceding three months.
Realty firms have refrained from launching projects and tried to finish those in hand. Prices did not rise, and even dropped in certain markets. That most buyers still stayed away did not help, resulting in a severe crunch in project cash flows, leading to either slowing down of construction or builders raising expensive debt to finish the projects.
In India’s largest property market, the National Capital Region (NCR) centred around Delhi, also the worst impacted by the ongoing slowdown, the key grievance is non-delivery of homes.
But at its core is the belief of buyers that developers never intended to keep their promises and used their money to expand their businesses.
Vivek Tyagi, president, Anthea Homebuyers Association, says the plan is to turn their protest into a movement. Buyers of units in Anthea, a project in Gurugram launched by Unitech in 2011, have fought its promoters, until managing directors Sanjay and Ajay Chandra were arrested in April on charges of money laundering and failing to deliver the project.
“The last four years have been a struggle, but when the promoters were finally arrested, we knew that we will get justice," Tyagi said.
“2017 will be a watershed year, one that made the playing field equal for both buyers and developers. Before RERA, people had been taking action against defaulting builders either by going to the civil courts or to consumer courts. Now there is a statutory recognition of the liabilities of the builders and it’s a great thing which is happening," said Ameet Hariani, managing partner at law firm Hariani & Co.
Changing the mindset of the homebuyer is the single biggest challenge next year, said developers.
They have tried attracting buyers with price cuts, flexible payment schemes and easy loans, offers such as zero goods and services tax (GST), but the latter are still in ‘wait and watch mode’.
Rajeev Bairathi, executive director and head of capital markets at property advisory Knight Frank India, said that market fundamentals had changed and are buyer-driven now, pushing developers “to incorporate customisation and appropriate pricing mechanisms in projects to suit what the buyer wants".
Mid-income housing projects, in the Rs25-50 lakh range, are expected to dominate sales volumes in 2018. RERA has pushed developers towards timely delivery of homes and keeping promised made to buyers.
Anuj Puri, chairman, Anarock Property Consultants, said the awareness among consumers witnessed this year is unlike anything seen before and added that developers are more cautious on what they bring into the market.
“Developers know that there is a regulator and a proper regime. Now the approach is more serious... they have to deliver within the timeline promised," he said.
Rajeeb Dash, head-corporate marketing, Tata Housing Development Co. Ltd, said projects are increasingly designed to suit consumer needs. The firm has opted to break up projects into multiple phases for faster execution and delivery.
“Earlier we used to build 600-700 units in one go. Post-RERA, we are making the project life-cycle in such a way that it can be flexible. That’s a big shift in our mindset," Dash said.