Residential realty hit by crunch,36% projects delayed

Some of the recently launched projects in the MMR where buyers will have to endure delays include Orbit Residency in Andheri,Indiabulls Green in Panvel,Lodha’s Casa Royale in Thane and Casa Bella in Dombivli,Seth group’s Vasant Oasis in Marol,CCI projects’ Rivali Park in Borivali,Man Infra’s Man Opus in Mira road,Raunak City in Kalyan and a slew of projects in Kharghar and Mumbai Central.

Liases Foras’ research shows that the total percentage of existing projects facing construction delays is way over 60 per cent. That is,if one takes into account the number of projects launched two to three years ago,but a substantial inventory of unsold houses still remains.

“Developers claim that delay in approvals could be a factor,but the primary reason why Mumbai is the worst affected is because it is the only market with hardly any sales. Normally,the sales proceeds are enough to cover construction costs. But in this case,while there are no end-user sales,even the money flowing in from investors and private equity is being poured into land purchase instead of being used for completing the projects,” said Pankaj Kapoor,CEO of Liases Foras.

He said the aggressive land deals are a result of the political tutelage enjoyed by developers,who first purchase land at seemingly unviable rates and then get policies modified to get increased FSI in the form of parking,IT park or ornamental projections. “This leaves prices in the city lurching at unaffordable levels.”

The FSI largesse has fuelled the flux of super-luxury apartments that add to the unsold inventory pile-up. According to Liases Foras,nearly 25 per cent of new housing stock in MMR is priced at over Rs 2 crore. This is a sharp rise from 2008 when only 9 per cent of the total projects were above this benchmark.

“Private equity capital should be restricted to capital intensive assets such as commercial and hospitality; it should not be allowed in residential market. Moreover,there has to be a mandatory provision whereby developers have to use 70 per cent of the realised money for construction,which would in turn check delays and overleveraging,” said Kapoor.