MC Explains: How will Delhi-NCR construction ban affect the real estate sector?

GRAP is an emergency response system that will be put into action when air pollution levels reach a certain point. When the AQI is in the "poor" category (201 to 300), Stage 1 of GRAP is activated. The second, third and fourth stages are to be put in place three days ahead of the AQI reaching the ‘very poor’ category (301 to 400), the ‘severe’ category (401 to 450) and ‘severe +’ category (above 450).

What happens under GRAP Stage III?

Under GRAP Stage III, all construction and demolition activities are prohibited, except for those necessary for ensuring national security, defence, healthcare, and the development of railways, airports, metro rail, interstate bus terminals, roads, flyovers and other structures. Additionally, mining won't be permitted in the area.

What has triggered the fresh ban in the Delhi-NCR region?

On October 27, the air quality index was 354, on October 26 it was 271 AQI, on October 25 it was 302 AQI, and on October 24, the Diwali day, it was 312 AQI.

The CAQM order on October 29 said, "As per the dynamic model and weather/ meteorological forecast, the overall air quality over Delhi is likely to remain in the Very Poor to Severe category from October 29 to October 30. The air quality is likely to deteriorate and remain in a Severe category from October 31 to November 1 and for the subsequent six days, the air quality is likely to fluctuate between the Severe to Very Poor category."

Due to unfavourable meteorological conditions with slower wind speed and sudden spike in the farm fire incidents, it was considered necessary to implement Stage III of GRAP with immediate effect in the entire NCR, the order added.

How will it affect the real estate sector?

The recent decision on a complete ban on most construction activities might lead to a surge in apartment costs, Amit Goenka, managing director (MD) and chief executive officer (CEO) at Nisus Finance says. "The decision will certainly impact the bottom line of developers but may lead to a price increase as expected supply does not meet current demand. And costs for developers to become compliant with the regulations may have to be factored in going forward," Goenka said.

Additionally, losses incurred during this phase may get passed on to consumers as the builders will try to recoup lost interest costs, he added.

Noida-based realtor Surendra Khariya said, "Last year when the construction halted due to similar reasons, the projects were delayed for two-three months."

Manoj Gaur, President, Confederation of Real Estate Developers' Association of India (CREDAI) NCR and chairman and managing director, Gaur Group, said the construction ban causes even non-polluting sites to stop work and the workers may leave the city fearing an extended ban. "And by the time, the workers are called back and the construction restarts, already several months will have passed. At that juncture, several prospective homebuyers consider their decisions to buy the project," Khariya added.

As per ANAROCK research, there are over 4 lakh homes under different stages of construction in the Delhi-NCR region. The impact of a ban on all construction activity in these areas can delay the projects for three-four months.

What solutions do developers offer to tide over the issue?

Developers note that pollution is a growing problem and should be dealt with holistically. Especially in Delhi-NCR, the source of pollution comes from the construction sector as well as from stubble burning and other emissions.

Gaurav Gupta, secretary, CREDAI NCR told Moneycontrol, "In the end, it is the homebuyers who need to wait or pay more money. Mitigating measures like anti-smog guns and windbreakers are being increasingly used to prevent pollution due to construction activities."

Previously, CREDAI NCR had written a letter to Real Estate Regulatory Authority (UP RERA) and Delhi RERA, asking the authorities to include RERA-registered projects in the exempted category lists. Gupta said they are still awaiting a response from the government bodies.

However, Ritesh Mehta, director, JLL, said the exemption or the construction ban cannot be a solution to tackle the problem. "We need to regulate the construction sector and set up committees, even among the developers, to come to a holistic solution together. If done 2-3 years back, today we would have policies and solutions to tackle the recurring problem, especially in Noida," Mehta said. Minimum parameters need to be set to developers today, he added.

Gupta said more than 50 percent of developers in the NCR-Delhi region have started following safer technologies like aluminium formwork construction and pre-fabrication construction techniques that are safer and considerably reduce air pollution.

UP RERA could not be reached for comments.

What do environmentalists say about the construction ban?

The real estate sector is already aware, environmentalists say.
Dr T V Ramachandra, a scientist at the Indian Institute of Science, reiterated India needs core policy changes in its construction sector to solve this problem. "Several European countries have tackled this problem using special monitoring devices and site controls," he added.

A research paper from World Resources Institute (WRI) mentions several measures that can be taken up for clean construction. "If clean construction methodologies and measures are quantified, and the construction sector chooses to consciously pursue them based on true evidence, blanket restrictions will prove redundant," the research says.

Another Switzerland-based journal mentions, "Optimised construction processes, healthier materials and international agreements and policies such as the Sustainable Development Goals (SDGs) can support the sustainable development of the construction industry across the globe."

Akash Vashisht, a National Green Tribunal (NGT) lawyer, said, "The larger public interest is in improving the quality of the air. At this point, there must be a balance between the builder and the homebuyers, in the case of delays due to halted construction. Additionally, it must not be seen as a setback but should set a precedent for the real estate sector in India."

Experts say today the developers are already aware -- what lacks is the implementation of the policies and are integrating modern-day technologies. "Though GRAP is solving the problems over a short time, we need stringent implementation of the policies, especially in real estate, to have a larger impact on the environment," Vikrant Tongad, another environmentalist added.