Project Delays Mainly Caused by Diversion of Funds by Major Developers

Published: August 10, 2009

The prime reason behind project delays in Delhi-NCR has been the diversion of funds by all the major developers. During the boom time, they had over-booked their projects and then failed to deliver their commitments. In fact, the immediate impact of the global slowdown on the Indian residential real estate market was most visible during the second half of 2008. And then, many under construction projects got delayed due to a sudden and rapid contraction in demand. This was accompanied by a significant drop in the residential real estate supply statistics across India as many developers adopted the cautious approach and deferred their plans for any new launches for the rest of 2008.

By early 2009, many developers had adopted the obvious strategy of price correction in existing projects to clear mounting inventories and lure the consumers back into the market. During this period there was another paradigm shift that occurred as many developers understood that the market had converted from an investor driven one to an end user dominant one. Recognising that the end users were seeking homes that were affordable the developers altered their product portfolio and launched affordable housing across India to revive demand by the end of the first quarter of 2009. The Affordable housing concept coupled with reduced home loan rates put the residential real estate market on the path to recovery.

While this interesting phenomenon was emerging across India, PropEquity began a research on 36 cities in India to study the overall impact of this shift and rank the city that holds the highest potential of future growth, provides maximum investment potential and has demonstrated the healthiest absorption values during this dynamic phase of real estate development. Over 10,000 apartment and villa projects of 3000 developers in 36 cities were analysed during the course of the study for the first two quarters of 2009 to rank the top 10 leading real estate destinations in India. DELHI-NCR

Our study has revealed some of the startling facts like the four cities of the National Capital Region (NCR) are amongst the top 10 cities ranked on absorption. Noida has emerged as the leader in NCR. Noida and Faridabad have demonstrated high absorption primarily due to launch of affordable projects. The recent projects of Jaypee Aman in Noida and BPTP (Elite Floors) in Faridabad were primarily driving the high absorption values in these cities with developers commanding more than 70 per cent of the market share for the period of Jan 09 to June 09. Only 3 cities namely Gurgaon, Ghaziabad and Faridabad of the NCR appears in the list at low rankings of 5th, 7th and 8th.

The gap between the first (Mumbai) and second (Pune) ranked cities is 21 per cent. However this gap doubles (51 per cent) between the cities ranked 2nd (Pune) and 3rd (Noida). Thereafter the rank differences are marginal. Mumbai witnessed the highest absorption of 17,689 units during the period of Jan 09 to Jun 09. Pune which had recorded low absorption levels till Dec 08 witnessed a healthy absorption of 13,899 units during the first half of 2009 and was ranked 2nd in the category. Mumbai and Thane representing Mumbai Metropolitan Region, together lead the total absorption at 22, 049 units, followed closely by NCR at 20,275 units.

The southern region has the second largest share in the unsold supply category that stands at 31 per cent of the total. The eastern region has witnessed lowest absorption levels As compared to the rest of India. Kolkata represents the eastern region and has the lowest unsold supply at 9,672 units and is 10th in the overall ranking.

Source: Indian Realty News

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