Why Are Developers Unable To Give Possessions On Time?

Homebuyers in India have to face troubles. But, what upsets home buyers the most is the delay in possession and project completion. Every buyer has a fixed timeline when he plans to invest in real estate. For most of the buyers, property investment remains a onetime activity that takes up a lifetime's savings. However, when these deadlines are not honoured by the developer, a home buyer has to manage monthly rent for the existing home, home loan EMIs as well as the mental pressure. So what causes these delays and how can home buyers safeguard themselves? Here are a few points to be noted:

Market situation

A real estate developer follows a normal procedure which involves an investment of money for buying the land, approval fees, finalising the design and development plan of the project. A builder intends to sell 20 per cent of the total stock at this stage to raise working capital for further construction. However, as the market is slow in the current situation, the builder finds it hard to collect the capital sum to start the construction work, leading to delay in construction.  

This is the reason why buyers are always advised to avoid purchasing the property in the soft launch as chances of the project getting struck are high. While the pricing remains attractive, invest in the early stage of the project only when the builder has a good reputation and track record in the market.

Also Read: Understand The Difference Between Pre-Launch And Soft Launch

Approval delays

“There are about 48 approvals a developer needs to take while undertaking any construction. While these are lengthy procedures, corruption has led to the slowdown in the work. Hence with the new law, procedures where the approvals will come in 30 days or else, the developers can start the construction by filing an affidavit will help to gain momentum. The harassment faced by the developers will reduce,” says Amit Wadhwani, Director, Sai Estate Consultants.

Funding issues

Possession delays also happen because of funding issues. Since commercial borrowing is expensive than retail loans, builders offer home buyers with an option of 'No-Interest' till possession payment scheme. In this plan, the builder chooses to pay the interest to the bank on buyer's behalf which is very less as compared to the commercial interest rate.

Demand and supply situation

“The real estate sector is highly unregulated and hence the patterns of demand and supply keep on changing, this leads to changes in consumer sentiments. Professional approach by the developers and the industry on the whole, proper utilization of fund instead of diversification for other projects, easier availability of credit, better circulation of funds through foreign capital inflow and reduction in interest rates look like the possible measures that should enable the developer and the market to get a stability to resume within the industry,” adds Wadhwani.

Developer's negligence

Though few developers raise genuine reasons for the delay in delivery, there are many real estate builders who have a poor sentimental interest in the completion of the project as they don't want to spend from their own pockets due to which the project keeps on lagging. “The market has seen developers in the 90's who used to invest in projects and would be holidaying outside the country for half a year without sharing the responsibility of completion on time. The need of the time is informed and educated younger developers who are able to dedicate themselves and complete all the documentations on time keeping their records cleaner,” adds Wadhwani.

Also read: 10 Things You Should Check Before Taking Possession Of Your Property