Chennai could be a market for consumers. But absence of liquidity for building firms and high interest rates charged by housing finance firms have resulted in greater stalled projects and fewer fresh projects resulting in greater opposition from homebuyers.
Chennai has 8,650 postponed units worth almost Rs 5,620 crore that are still to be supplied. These projects were introduced in or prior to 2013, while information further confirms that none of these complete delayed units have been totally stalled / canceled by the corresponding builders so far, information from the estate advisor, ANAROCK, is showing.
There is still hope that constructors will finish these postponed projects and hand them over for ownership to the corresponding buyers, “said Anuj Puri, ANAROCK chairman.
Just when Chennai was recovering from the 2015 flood’s debacle, demonetisation, RERA and GST have further dampened the real estate industry’s spirit. Among the various reasons cited for construction delay, slow housing sales in Chennai over the past three to four years has led to project delays as developers are not getting the funds to complete their projects.
“The real estate market in Chennai is more favourable towards the buyers, for the cost price of a house that is previously charged at Rs 5,000 per sq feet can be bargained and brought down to Rs 4,200 sq feet. This was not possible in the real estate market before demonetisation,” Vijayakrishnan J, a Chennai-based real estate agent, said.
“Poor flow of funds is the primary reason behind unfinished realty projects. We can see a number of skeleton projects on the Old Mahabalipuram Road. Even if reports claim that there is a marginal rise in finished home projects, yet the city was yet again hit with summer water scarcity,” Vijayakrishnan said.
Lack of sand is also a serious contributing towards delayed housing projects. Now builders are substituting crushers, where rocks are crushed by a machine and used in the place of sand.
“The quality of crushers is questionable,” he said.
Developers who struggle with finances point at crisis-struck NBFCs who refuse to honour prior promises. An official from GIC Housing Finance, said, “The housing loan disbursement rate was approx. at 60-65% in 2017-18, while it has lowered to approx. 40% this year.”
According to a report of a global real estate consultant, Knight Frank, there will be a possibility of delay of six-to-nine-month delay in project deliveries due to the recent water crisis in summer.
“A marginal decrease in the unsold inventory by 21% YoY. However, this is due to low launch of housing projects number in 2018,” Knight Frank’s report said.
The residential market in Chennai shows signs of recoveries in both sales and launches of new projects in H1FY2019. However, the overall demand continues to lacklustre as homebuyers continue to resist high property prices.
The Chennai bench of National Company Law Tribunal (NCLT) had approved for a resolution plan for a Chennai-based realty firm, Vishwakarma Real Estates and Constructions, which was a relief for both the homebuyers of the stalled projects of the company and the construction company itself.
A resolution plan of Rs 136 crore submitted by Oasis Grace Engineering Projects Pvt Ltd, an Indian arm of Oasis Grace LLC, Muscat, and Care Promoters was approved by the NCLT on June 11.
C Shanker, one of the promoters of Vishwakarma Real Estates, said, “The phase-I of the construction project with 176 houses has been restarted. We have about 97 happy homebuyers after this NCLT resolution order.” This the first a real estate firm gets a resolution plan approved by the NCLT.