NCR’s real estate nightmare is coming to an end

Singh, 43, had booked a three-bedroom apartment on the ninth floor of the Apex tower in Noida’s Sector 93 all the way back in 2009. He’d shelled out about ₹50 lakh. The apartment was originally scheduled to be delivered by December 2012. A decade later, Singh, who works as a building contractor, continues to live with his family in a rented apartment in Ghaziabad.

While the Supreme Court has directed the developer to refund homebuyers fully within two months (along with 12% interest from the date of booking), Singh is less-than-happy with the solution. “The court passed a landmark judgment, but what will we buyers do? We want to request the court to give us a home anywhere. We don’t want (a) refund. I have made 95% of the payment for my home, so I want a 3BHK anywhere else,” Singh said.

The Supertech saga is just the latest in a long line of real estate scandals to rock the national capital region (NCR), which happens to be India’s largest real estate market. Years of unchecked real estate expansion led to the frequent diversion of funds away from projects into other non-real estate ventures and fuelled a land-buying frenzy. An unsavoury nexus also thrived between developers and development authorities in the region. The result: Delhi-NCR alone has over 328,000 homes that are either terminally stalled or heavily delayed, accounting for 52% of all such units across India’s seven major cities, according to Anarock Property Consultants’ analysis in August. Greater Noida comprises 50% of the stuck or delayed units, followed by Noida, which has a 16% share (53,680 units).

While homebuyers in Delhi-NCR have been the worst affected as a string of large real estate firms—ranging from Jaypee Infratech Ltd, Unitech Ltd and Amrapali Group to Supertech—swiftly fell from glory, the mammoth scale of the crisis has also induced a clean-up exercise at last.

There’s the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund, with a ₹25,000 crore corpus, that has come forward to complete 1,500 stalled projects across the country. State-run National Buildings Construction Corporation Ltd (NBCC) and a few well-capitalized developers have simultaneously taken charge of various stuck projects in NCR. Homebuyers can now file claims before the consumer courts under the Real Estate Regulatory Authority (RERA), and before the National Company Law Tribunal (NCLT) by invoking the Insolvency and Bankruptcy Code (IBC).

“A serious amount of consolidation has happened in NCR and we are hardly left with 10-12 developers. The market had collapsed because of speculative, short-term investors and (a) lack of execution by developers. Then, RERA came in and the market cleaned up. Branded developers have slowly gained the trust of buyers. Given the massive scale of stuck projects, the resolution process may take 3-5 years, but the process has begun,” said Samir Jasuja, founder and managing director at PropEquity, a real estate data analytics platform.

Is the worst of the crisis over then? And will NCR’s realty market now get back on to the long and narrow road to recovery? More importantly, what does this saga teach boom towns in the rest of the country?

Is the worst over?

By mid-October, Puneet Parashar has to pay up ₹16 lakh of outstanding dues for an apartment he had booked in the erstwhile Amrapali Group’s HeartBeat City in Noida in 2011. The original possession date for the said property was 2014.

If Parashar fails to clear the outstanding dues, his flat allotment could be cancelled by the Supreme Court-appointed court receiver and the apartment will be considered as unsold inventory.

After a decade, construction had restarted earlier this year in the incomplete project, and as per the new delivery timelines, the project should be ready by 2022. Like many other projects of the Amrapali Group, this one too came under the lens for its defective land title and went through a years-long legal tussle. However, after the Supreme Court appointed National Buildings Construction Corp. in 2018 to finish the stalled projects, thousands of homebuyers in the developer’s projects are finally seeing a sliver of hope.

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According to media reports, there are at least 10 projects in Noida and 12 in Greater Noida that are currently under execution by NBCC—involving 45,957 units.

“I have made 80% (of the) payment for the ₹76 lakh apartment, but the remaining amount needs to be paid now. We now know we will get our home, sometime in the future. However, 16,000 of the 44,000 Amrapali buyers have not paid the dues as per the court receiver’s records or updated their details on the latter’s website,” said Parashar, a happiness consultant, who still lives on rent in Noida.

Legacy projects aside, property consultants believe that the implementation of the Real Estate Regulatory Authority has somewhat accelerated the clean-up in property markets such as Noida and Greater Noida in Uttar Pradesh, which has been a hot bed of the ongoing real estate crisis.

Rajive Kumar, chairman of the Uttar Pradesh Real Estate Regulatory Authority, said: “There is greater transparency. We have also done reasonably well on dispute resolution. About 37% of all complaints in India are filed before UP-RERA, but 40% of (the) resolution is also from here. Most of the problems that NCR is facing are primarily related to ongoing projects, but the good news is that things are getting better. There is a fair degree of improvement with the projects slowly getting completed.”

“Unfortunately, covid was a setback to the green shoots in the industry. Unless projects get completed, there is no solution…because buyers don’t get their homes and financial institutions can’t get their money back. All efforts have been to see that projects get completed, But I do believe that the worst is behind us,” Kumar added.

Demand is back

In September, Godrej Properties Ltd (GPL) said that it has sold 340 homes, constituting half a million square feet and worth ₹575 crore, on the launch day of the second phase of its Godrej Woods project in Noida. This could be an early sign that recovery is well on track.

To be sure, project launches had dropped across the country post-covid, but it reduced to a trickle in NCR. New launches in NCR had gone down from 26,409 units during January-June 2015 to 7,549 units during the first half of 2021, according to data by PropEquity.

“The recovery momentum in NCR post (the) second wave (of covid-19) is strong, and largely led by end-users. There are limited developers left in the market, which makes this an attractive opportunity for us to go out and buy more land, explore acquisition possibilities,” said Mohit Malhotra, managing director and chief executive officer, GPL.

GPL entered the NCR property market in 2010 and has so far added 17 projects across the five cities in the region. It is looking to launch multiple projects in the coming months—in Okhla, Noida, and Gurugram, apart from a large residential project in Ashok Vihar, Delhi.

“Alongside the corporate developers, or those who have entered NCR in recent years, some regional developers, too, are selling,” said Santhosh Kumar, vice-chairman, Anarock Property Consultants. “Unsold inventory is gradually going down. The good thing is end-users are coming back to the market and sales is gaining pace, but it’s also clear that the demand today is not for everyone, but only those developers who have delivered projects and have earned the trust of homebuyers,” he added.

According to Anarock data, Gurugram-based Alpha Corp. Development Pvt. Ltd will invest ₹900 crore in three stalled projects of Earth Infrastructure (in Gurugram and Greater Noida) that were launched in 2010-2012 and the Gaurs Group has taken charge of the effort to complete over 10,964 homes in Amrapali projects.

Sahil Vachani, managing director and chief executive officer of Max Ventures and Industries Ltd, which is part of the Max Group, said the company had entered the real estate business in NCR four years ago due to the absence of trustworthy brands. While it has till now been building a commercial office portfolio, the company is starting multiple hous ing projects in Noida, Delhi and Gurugram.

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“We are looking at both greenfield and brownfield opportunities and acquiring distressed assets through the IBC route. There are teething issues to be sorted out in these projects, but they can help in building a pipeline,” Vachani added.

The continued lack of trust in developers such as Supertech that has been in the news, and the likes of Amrapali and Unitech earlier, is evident, as the overall sales and demand for their housing projects have sharply dropped. Larger real estate firms have tried to leverage this in their favour.

What lies ahead

If the covid-19 pandemic caused a sharp disruption across all property markets, in NCR, it has also led to further consolidation, rationalized project launches and created genuine demand for homes among buyers who have been fence-sitters for long. What the prolonged crisis and pandemic have also done is compel developers to launch and develop products that they can build and sell within a reasonable time frame. With the introduction of RERA, which monitors project completion and penalizes violation, and customers turning more cautious, the days of 300-400 acre projects also seem to be over.

“Investors are coming back into the market. If that happens, it will lead to volume growth too,” said PropEquity’s Jasuja. “In plotted development projects, we have seen investor demand and a price rise of 20-40%. Independent floors have also seen high demand. If the market improves, delayed and stuck projects may also witness a rethink due to the increase in value.”

Despite the early signs of recovery, however, it would need a serious push in sales for any visible impact, considering how large the NCR market is.

Pankaj Bajaj, president of the industry body Confederation of Real Estate Developers’ Associations of India (Credai), NCR, said that customers no longer make a distinction between national and regional developers. They now check whether the developers are trustworthy or not.

“For a tumultuous few years, the share of troubled developers went up, Now, stronger developers will take over the stalled projects. With projects that have reached the NCLT, there will be clarity and resolution at some point. RERA has also been fantastic in NCR and is pragmatic about the problems developers face. There are cash flow issues still but good developers have access to capital. Most developers have also realized that they need to have smaller sized projects and turn it around quickly after RERA,” said Bajaj, who is also chairman of the realty firm Eldeco Group.

The firm recently raised ₹150 crore from HDFC Capital Advisors Ltd for its plotted development projects, at a time when many investors have been wary of investing in NCR.

The other silver lining is the NCR’s commercial office sector, which is expected to see a big return of demand.

“As tech firms continue to invest and hire, NCR’s office market will see a return of demand due to the talent available there,” said Anshuman Magazine, chairman and chief executive officer, India, South-east Asia, Middle East and Africa at property advisory CBRE. “Both Gurugram and Noida are key office markets that offer both premium and affordable office space for rent.”

Amid such positive signs, buyers such as Amit Gupta, an HR consultant, have not given up hope even after waiting 11 years for a terrace apartment that he had booked at Amrapali’s Centurian Park in Greater Noida. “We, as buyers, have faith in the Supreme Court. Amrapali is a pandora’s box and a complex issue,” said Gupta, who still lives in a rented apartment in Vasundhara, Delhi. “But I had bought a home and continue to chase my dream.”

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