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Bengaluru/New Delhi: Real estate investors who have taken a hit from a slowing property market are putting pressure on developers to cancel bookings and return their investments.

More than three years into the slowdown, the real estate market in the National Capital Region (NCR) remains the worst-hit. In the primarily investor-driven NCR market, disgruntled investors are saddled with incomplete and delayed projects, falling prices and uncertainty about the future that makes it tough for them to exit.

While the Mumbai and Bengaluru property markets also have their share of investors, it is NCR that is facing the strongest backlash from the investing community.

According to a report by Liases Foras Real Estate Rating and Research Pvt. Ltd, NCR has 366.8 million sq. ft of unsold stock, followed by Mumbai Metropolitan Region (MMR) with 266.7 million sq. ft.

India’s largest real estate firm DLF Ltd, whose core market is Delhi and Gurgaon, said it achieved gross residential sales of Rs470 crore during the June quarter. However, cancellation of about Rs265 crore of legacy projects resulted in overall net sales bookings of Rs205 crore.

“If a project hasn’t made the kind of gain (expected) and if a customer wants to go out, we are okay. Most cancellations have happened in our rest of India projects (outside Gurgaon) and New Gurgaon, where prices have not gone up. We are refunding their money with the hope that we can sell the properties when the market improves," Saurabh Chawla, DLF’s senior executive director-finance, said in an analyst call on 30 August.

In the past few years, short-term investors have almost disappeared from real estate, said property consultants. Typically, investors put in their money at the launch or pre-launch project stage. This gives them enough scope to hold on for prices to appreciate as construction progresses. When the real estate sector performed well, the returns were good. But when the market slowed, prices corrected and delays crept in, it became tough for investors to exit with decent returns.

“Wherever investors have invested and the projects have been completed, they are getting reasonable returns. The problem is with under-construction projects, where their investments are stuck," said Santhosh Kumar, chief executive, India operations, at property advisory JLL.

“For investors, the circulation of money is very important. They cannot survive if their money is stuck. If they are stuck in a project without any return, then they would likely take their money back from the developer and would even be ready to take a hair-cut on their investment," Kumar said.

Not only do investors want their money back—over the past few months, consumer activism in real estate has been at its peak and consumer associations have been dragging large developers to court and seeking refunds.

On 2 September, the Delhi high court directed Unitech Ltd, a Gurgaon-based real estate firm, to open escrow accounts in its delayed residential projects in order to protect the interests of home-buyers.

In August, the Supreme Court asked real estate companies DLF Ltd and Parsvnath Developers Ltd to compensate two sets of home-buyers who had not been delivered their flats.

“I have invested a lot of money in a lot of places which is practically stalled, just sitting. I have a hunch that I have to wait till Diwali 2017. It would not be feasible to make an exit now because anyone who comes to buy is offering a pittance. If an investor can hold out for another 12 months, things will really change," said Sunil Jain, who has invested in Unitech and Emaar MGF Land Ltd’s projects in Delhi-NCR.

Another investor, Rajiv Tandon, who has bought into DLF and Emaar MGF projects in Delhi-NCR, said it all depends on the status of the investor.

“If he is in a position to hold on, it is good. If he can’t, then he has no choice," he said. “I don’t think there is any good exit opportunity in the properties in which we have invested, even if there is a person who wants to take advantage (of the slowdown) and pay a price that is 30% less than original."

Unitech and Emaar MGF did not respond to queries about cancellations and how they are dealing with investors who want to exit.

Despite the crisis, sales momentum in the NCR is believed to be improving—slowly but steadily. In the June quarter, sales in the NCR rose 12% to 17.5 million sq. ft year-on-year, according to the Liases Foras report.

“With a slight improvement in sentiment and sales, investors will be able to exit at a fair price if not at a premium. We are requesting them to hold on for some time because as projects progress, prices will escalate. We don’t want to encourage cancellations and refund in a cash crunch market though we handle it on a case-by-case basis," said Achal Raina, executive director, Lotus Greens Developers Pvt. Ltd, a realty firm with projects in Noida and Gurgaon.

Developers now need to find solutions to prevent further customer unrest and collaborate with customers to ensure that projects are completed despite the slowdown.

“Investors can get out by collaborating with the builders. Cancellations are also happening but for that the builder should also have the pocket to pay back," said Ashwin Jain, partner at Gurgaon-based property advisory NK Jain & Co.

“Refunds are very few. No developer wants to give a refund unless they are against the wall due to a legal case or on a case-by-case basis," Jain said.

Jain cited the example of a way out. Investors in a stalled AEZ Aloha apartment project in Gurgaon pooled in more money along with the developer to see the project through to 90% completion, with possession expected to start by December.

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