Real Estate in a Fix: Why Are Homebuyers Struggling?

According to estimates, out of 62,773 housing projects in Noida, 60,543 are delayed.

The Supreme Court on 8 August warned the directors of the Amrapali Group that they would be rendered homeless if the company fails to raise Rs. 5,112 crore required to complete its housing projects.

Approximately 42,000 Amrapali homebuyers have been fighting for their dream homes which have been stuck for over 3 years now.

But this is just one group, there are many other groups and projects that have been stuck for years with no clarity on when the projects will be delivered.

According to PropEquity, a real estate data and analytics firm, out of 62,773 houses in Noida, approximately 60,543 are delayed and out of 1,24,294 houses in Greater Noida, only 2,395 have been completed.

So, why has this delay happened? What are the reasons behind the failure for delivery of flats? Where have the funds of the homebuyers gone? Why is no action being taken against them? And are the authorities equally responsible for this mess?

The average delay in all these projects is a little more than three years.

Why Have The Developers Failed to Deliver?

According to lawyers, homebuyers and petitioners, the prime reason behind the delay in delivery of projects is siphoning off funds.

Speaking to The Quint, Abhishek Kumar, President, Noida Extension Flat Owners’ Welfare Association (NEFOWA) alleges, “95% of builders in Noida have diverted their funds to other projects. They have funded one real estate project with another which is a crime but in reality no action is being taken against them.”

NEFOWA has been fighting a case against the Amrapali group with more than 2,500 homebuyers in the Supreme Court.

Kumar alleges that since 2010, siphoning off funds has been happening and three governments have changed in the state of Uttar Pradesh, but none of them have taken any punitive action against these real estate giants.

The land was allotted to the builders during Mayawati government, no work happened during Akhilesh’s government and now Yogi Adityanath is trying but the builders claim that they have no money. 

Abhishek Kumar, President, Noida Extension Flat Owners’ Welfare Association

As per the submissions made by Jaypee Associates in the Supeme Court, the reason for delay in the projects vary from labour crunch to the 2013 National Green tribunal (NGT) order that restrained construction within 10 kms radius of Okhla Bird Sanctuary without environment clearance.

But the experts argue that the developers have not been able to deliver on their promises due to varied reasons like greed, mismanagement of cash flows and the developers’ ability to assess the condition of the market.

According to a report in Livemint, since the developers launched projects without assessing the need of the homebuyers there is a a huge unsold inventory of houses in the market. And since the cash flows weren’t managed well, a lot of projects are running behind schedule.

Other than failure in delivery, developers in many cases have also delivered poor quality apartments. So, the unkept promises are not just that of houses which haven’t been delivered but also the houses which have not been up to the promised standards.

Are the Authorities to be Blamed?

While there is agreement that the developers have failed to deliver what they had promised, there is also a claim that the authorities should have been more vigilant in pulling up these builders.

Santosh Kumar, Vice Chairman, Anarock Property Consultant holds the view that the first delay was caused by the authorities in various approvals and also the allotment of land.

You can’t start the construction unless there is an approval. There are environment approvals and other approvals. There has been a delay from the developers but there has been a delay from the authorities as well.

Santosh Kumar, Vice Chairman, Anarock Property Consultant

Payment for acquiring a land is also an issue in Noida which gives leeway to these developers.

Arijit Mazumdar, a real estate lawyer, told The Quint that in Noida most of the land is sold after receiving a part of the payment and not the full payment. Hence, the developers make a percentage of payment and rest is done over a period of time.

“What ideally should have been done was - if there is a payment default of two installments, the authorities should have been vigilant and taken notice of the situation. That could have put stop construction boards or something so that people would have known about it,” Mazumdar added.

Abhishek Kumar of NEFOWA also says that rampant corruption has led to this kind of a leakage. According to him whenever the builders default on their payment schedule, a new date is given to them instead of taking the project from them and auctioning the land to a new developer.

Has the Government Done Enough for Redressal?

In 2017, Uttar Pradesh Chief Minister Yogi Adityanath promised that the grievances of thousands of aggrieved home buyers will be redressed. He formed a three minister committee comprising of Industry Minister Satish Mahana, Urban Housing Minister Suresh Khanna and Minister of State for Industry and Sugar Mills Suresh Rana.

The committee disclosed its action plan in August 2017 and said that co-developers will be brought in to finish the unfinished projects.

According to a report in Hindustan Times, Suresh Rana, minister and member of the committee had said in Decmeber 2017 that the committee has been able to solve much of the problems of homebuyers and they have successfully delivered 40,000 flats.

However, Abhishek Kumar alleges that the numbers only exist on papers. He says that not enough is done by the committee to help the homebuyers and the promised number of houses that were to be delivered have not been given.

The committee that was formed by Yogi Adityanth hasn’t done anything because that committee is only working towards the welfare of builders and Yogiji doesn’t know the ground reality. The industrial minister in the committee Satish Mahana have not told the realities to Yogi. I am not questioning Yogi Adityanath but the committee is not working.

Abhishek Kumar, President, Noida Extension Flat Owners’ Welfare Association

Kumar is also a part of the committee formed by the Housing and Urban Affairs Ministry in 2018. He says that not much can be said about the central governments attempts because it has only been a month since the committee was set up.

ARE RERA GUIDELINES HELPFUL?

Real Estate (Regulation and Development) Act (RERA) 2016, ensures greater transparency and seeks to protect homebuyers.

While Arijit Mazumdar feels that RERA will definitely have a positive impact on the market in the next 2-3 years, Abhishek Kumar, on the contrary, feels that RERA too is losing its sheen as the orders are being passed but they are not being implemented.

Homebuyers' Plight

The Quint spoke to a few homebuyers to know for how long have they been waiting for their homes. Most of the homebuyers spoke about the financial burden that these flats have caused them.

A homebuyer who has bought two units with the Jaypee group in Noida, on conditions of anonymity, told us that her house was to be delivered in the year 2013 but there is no communication from the developer.

She also says that her calls and mails to the developer have gone unanswered and there is complete silence on the other end.

Another homebuyer says he had bought a Jaypee flat in Noida and the delivery was scheduled in 2013, but again neither is there any sign of completion of the project nor is there any communication.

Why is the Situation So Grim in Noida?

As compared to other Indian states, the situation is grim in Noida. One of the reasons that was pointed out by the market experts and the petitioners alike was lack of transparency.

Abhishek Kumar says that it is because of rampant corruption that the developers have it easy in Noida while other states have very transparent laws for real estate.

Market experts too pointed out that the land laws are flexible in Noida that lets the developers acquire the land with partial payment.

More so, it is also the role of the judiciary which is now in question.

Earlier, the Supreme Court had promised homebuyers to return their money but in its judgment on 9 August, it sent all the pending applications pertaining to the Jaypee Infratech insolvency case to the National Company Law Tribunal (NCLT).

One of the homebuyers questioned the Supreme Court and said, “In case of Amrapali group, SC has directed NBCC to take over the project but I don’t know how will that work out because the homebuyers have paid 90% of the amount. How will the funding work out?”

While the questions remain, the homebuyers still don’t know when the keys to their homes will be given to them.