Tejbir Raparia, a Gurgaon-based businessman was 45 years old when he bought a flat in Unitech Vista, Sector 70, Gurgaon, in 2012. Given that the project was launched in FY10 and was scheduled to be delivered by 2013, Raparia didn’t mind waiting. But with the project still incomplete seven years later, Raparia, now 52, is more realistic. Instead of waiting for the builder, he has joined the group of buyers in the project who have decided to take matters in their own hands. “We have asked all the buyers to pull the money and asked developers to pay the deficit for the remaining construction work. We are now monitoring the construction ourselves,” said Raparia. He hopes to get possession in a year from now.
Raparia’s is not an isolated case. Many Indian homebuyers have similar horror stories to share. Delayed possession, illegal or incomplete construction or unnecessary litigation have become more a norm than an exception. Yet for a sector that holds nearly 77% of household money, it took eight years for the Real Estate (Regulation and Development) Act (Rera), 2016, to see the light of day from the year it was proposed for the first time. If anything, this bears testimony to the fact that when it comes to real estate, developers backed by political clout still rule the roost and buyers having parked their life savings look from one authority to another for resolution.
First horror: delay in construction
It’s one thing to not deliver a project on time due to unforeseen circumstances, but it’s quite another to make it a norm. In fact, having normalized delays, the risk really is not getting the possession at all. For instance, investors of Jaypee Infratech Ltd have been waiting for more than 10 years to get their flats while paying EMIs for properties they don’t own or live in yet.
According to data compiled by ANAROCK Property Consultant Pvt. Ltd, a real estate consultancy firm, “About 5.76 lakh units were launched in 2013 or before and are still to be delivered. Given that the typical time required to complete a project does not exceed five years, these units can be categorised as ‘chronically delayed’ or ‘stuck’ inventory.” And Jaypee is not a one-off builder; the malaise spans an entire geography. In many cases, developers launched projects in phases, where the construction work in the first phase was showcased to attract buyers for consequent phases. In many cases, construction never started in the later phases.
While you suffer a delay, what do the developers do? Well many are known to use your money to fund other projects, or just simply siphon it off. Many of them are now facing insolvency proceedings, and their promoters and directors have been thrown in jail, but only after such practices became too big to ignore.
Even the Supreme Court admitted that banks and government authorities have been hand-in-glove with developers. In its order against Amrapali Group, an NCR-based real estate developer, which is accused of siphoning of funds and money laundering, which resulted in non-delivery of more than 40,000 housing units, the apex court stated that the developer is not the only culprit, and that government authorities and banks are equally responsible. It said that the Noida and Greater Noida authorities were grossly negligent in reviewing and monitoring the progress of the projects, while banks failed to ensure that the money was used for construction.
Second horror: illegal construction
The risk in real estate does not end with getting possession of your home and living in it, as the residents of Campa Cola Society in Mumbai’s Worli discovered in 2005. The Supreme Court later found the residential cluster to be illegal and ordered that it be razed down. Residents who had been living in the society for about 25 years lost their homes overnight. It was revealed that the developer had permission to construct only a few floors, but it violated the approvals to build additional floors. No authority stopped the illegal construction or occupancy of the apartments. While some homebuyers were aware of the irregularities, their fears were assuaged by the developer that things will fall into place, but they didn’t.
Similarly, the Supreme Court recently directed authorities to demolish a residential building consisting of several flats in Kochi, as it was built on the coastal zone, violating various norms. In this case too, the authorities failed to restrict the progress of construction and occupancy of the apartment at the right time.
Rera still has a long road to cover
Real estate investment in India is fraught with risk and poor liquidity that the asset provides only adds to the problems.
Even the Rera law has not been able to be of much help as it’s a state subject and many states are still to implement it fully. “Since Rera came into existence, things are gradually coming into place. However, the Act is still at a nascent stage and needs to cover a long distance. Except two to three states like Maharashtra, Uttar Pradesh and Haryana, other states are still to implement it in its entirety,” said Samantak Das, chief economist and head of research, JLL India, a real estate consultancy firm.
Even in the states where Rera is functional, many of its orders are still to be executed. Getting the orders executed seems to be another battle homebuyers are facing as authorities (the district magistrate in most cases) who need to execute the orders do not come under the ambit of Rera. These are clear cases of negligence and ignorance by authorities, but the ultimate sufferers are homebuyers.