Can RERA rescue 4.6 lakhs crore of unsold inventory pan India

Realising the significance of real estate on the economy of the country, the government has, over the last few years, been taking active measures to bring in greater transparency and efficiency.

However, despite the implementation of game-changing policies like RERA and GST, the issue of stalled or delayed projects that has primarily been at the core of buyers’ discontent is yet to be addressed satisfactorily.

According to Anuj Puri, Chairman – Anarock Property Consultants, “If we add up the numbers for the top 7 cities, it emerges that the residential real estate launched in or before 2013 that is stuck in various stages of (non) completion is collectively worth a whopping Rs 4,64,300 crore for a total of 5,75,900 units that are yet to be delivered to their respective homebuyers.”

This is apart from the other inventory under construction which, judging my visible construction progress, will assuredly get delivered over the next 3-4 years. These 5,75,900 units have been stuck since 2013 or before. 

As per ANAROCK data, MMR and NCR are the two major regions where maximum units with significantly high values have been delayed since their launch in 2013 or before. As many as 4,10,000 units across these two regions are grappling with some deployment issue or the other over the years, 

resulting in delayed possession. The collective approximate value of highly-delayed units in MMR and NCR is a whopping Rs 3,60,000 crore. On the other hand, Hyderabad has seen the least project delays during the period, with around 8,900 units worth Rs 5,500 crores delayed since 2013 or before.

Causes for projects delays

Puri says, “Major factors contributing to delayed possession of properties across the country include the prolonged liquidity crunch, delayed environmental clearances, land disputes and the non-RERA compliance prevalent across some of the states. Another major hurdle in timely delivery of projects is the shortage of skilled manpower to execute projects and streamline organisational processes.”

It is estimated that real estate and construction will require over 66 mn workforce by 2022 across different skill-sets while the shortage for the same is pegged at nearly 2-3 million during the same period. 

The scarcity of skilled labour invariably leads to project delays. Thus, the Government and the industry need to collectively address the issue by creating the required infrastructure for training the workforce. 

According to Puri, “The most profound impact of the housing delay is obviously on buyers who have already invested in the said projects, affecting their overall financial planning, increasing the burden of rent along with EMIs, etc. However, the concerned developers are also impacted. To begin with, they have in many cases invested gargantuan amounts of capital which remain locked into these non-performing assets. Secondly, they face severe loss of revenue due to lack of production and loss of profit for their contractors due to higher overhead costs.”

 In the more serious cases, accelerating the process of the project can also sometimes affect the product quality, at the cost of customer satisfaction, reputation and therefore future business viability (apart from the fact that serious quality deviations will run a developer afoul of RERA, resulting in legal consequences).

The stringent penalty clauses under RERA, increasing awareness among homebuyers, and a pro-customer judiciary have forced real estate firms to focus on timely project delivery and be accountable for the promises made. Besides having to defend themselves against aggrieved customers in courts of law, developers technically no longer have the choice of delaying projects because this is the ‘real’ essence of the new RERA.

However, RERA policies have been flouted across many states where several projects that have been ongoing since years and, thanks to the dilutions, do not come under its ambit. For instance, in Karnataka, all projects that are completed by 60% or more are currently exempt from RERA purview. This is significant since maximum project delays occur post a project’s major structure formation and during the time of final finishing.