Housing projects worth Rs 3.3 lakh crore face construction delays across the country: PropEquity

Over 4.65 lakh housing units across India worth Rs 3.3 lakh crore are facing construction delays, according to a report by PropEquity, an online subscription-based real estate data and analytics platform.

These projects are on hold for a variety of reasons that include financial constraints, execution challenges, surplus supply due to over ambitious launches by developers, environmental clearances and slowing sales among others, says the report.

“The government has started looking into projects that have faced maximum delays to ensure that they see the light of day at some point in time. Developers themselves have been forced to cut down on new launches and are instead focusing on execution. The problem of delayed projects is massive and worrisome,” says Samir Jasuja, Founder and MD of PropEquity.

Of this, nearly 1.8 lakh units valued at Rs 1.22 lakh crore are located in NCR alone. What's worse, in the NCR, over 70 per cent of the projects pending execution are fully sold but not delivered, according to the report.

In the Mumbai Metropolitan Region (MMR), 1.05 lakh units worth Rs 1.12 lakh crore are pending completion. Since over 40 percent of these projects are absorbed, there are fewer customers when compared to NCR, who are facing a scenario of non-delivery by developers (MMR includes, Mumbai, Navi Mumbai and Thane).

“Although the markets are facing significant execution delays we do expect reputed developers to perform well. We also anticipate that the resolution to this difficult scenario will occur in the form of consolidation that will be led by the larger and more capable developers who have the construction and execution capability to meet their promises.,” says Samir Jasuja, Founder and MD of PropEquity.

Kolkata and Hyderabad have been relatively insulated as compared to other regions as only 15,552 and 13,710 units respectively are pending execution and are valued at Rs 6,175 crore and Rs 7,778 crore respectively. Both these cities have been able to sell less than half of these projects, says the report.

As Bengaluru is an end-user driven market, only 40 percent of the projects pending execution were sold as there were few takers. Total value of these projects stood at Rs 26,454 crore for 38,242 units, the report says.

Pune, which has 22,517 units on hold, witnessed only 35 percent absorption of these units. Comparatively, Chennai with 20,847 units faced execution challenges and saw 47 percent of these projects being sold with a total value of Rs 9,511 crore.

“Our latest research shows that projects that are complete or nearing completion are attracting maximum buyers as these projects seem to be most risk averse in the eyes of buyers. However, we also believe that projects by renowned developers, with strong fundamentals would continue to do well irrespective of stage of construction,” says Jasuja.

With the real estate sector getting accustomed to reforms such as GST and RERA, absorption of ready-to-move-in units and those nearing completion are being preferred. Affordable and mid-income segment is expected to further grow due to favourable government policies.

“We also foresee an era of consolidation that will be led by the larger and more capable developers who have the construction and execution capability to meet their commitments,” he adds.