While protecting homebuyers, the apex court came down hard on the real estate sector. Will it produce results?
A decade ago, India’s real estate developers were flush with funds. You could see them and their families at top events in major cities, all arriving in supercars. Those funds they were spending like no tomorrow, were the funds of homebuyers. Thanks to artificially inflated prices and the sheer greed of developers who assumed that good times would never end. But good times did end — a global financial crisis and the end of cheap credit and overpriced properties in India meant that even though the overall global and domestic economy recovered, demand for real estate in India has shown no sign of recovery. In Greater Noida, where several big projects came up, it will take a whopping 85 months of sales just to clear current inventory, according to Indian real estate monitoring website PropEquity. And this with no new developments coming up in the meantime. But while real estate developers lived up to it, expecting good times to continue, they expected their strategy of rolling over funds to continue. Unfortunately, when good times ended, they found themselves with no funds to deliver on the promises made to homebuyers. Having invested heavily in commercial property as well, and not just the good life, real estate developers found themselves staring down a hole. Homebuyers, who expected home deliveries as early as 2012 and 2013, are still waiting for their promised homes, and with real estate developers being even lower in the trust ratings charts than Indian politicians, clearly no-one else wants to buy a house, thus sucking any potential demand.
And this inability to deliver has led to real estate developers standing in front of the Supreme Court as the buyers of these properties have rightly gone to the courts to get their hard-earned money back or get their promised homes. And the gall of some of the developers even in court is incredible as exemplified by Amrapali Group, which tried to propose that they would ask their homebuyers for even more money to finish what they should have finished years ago. The Supreme Court has rightly shot down this request, why should homebuyers sucked in by the false promises of real estate developers be left holding the bill for their profligacy? The top court also said that it will make the directors of the aforementioned firm homeless, and while that might make for a dramatic headline or two, it shows the public that the Supreme Court is clearly on their side and the stalling tactics of some developers will not sway the justices. Unfortunately despite such adverse rulings, it appears that it might still take another two-three years for developments to finish. This will only mean that the real estate market in India is still years, maybe even a decade away from recovery. The implementation of the Real Estate Regulation Act has given homebuyers some confidence and these rules should help the industry and buyers in the future. But Indians are still paying for the days of the Wild Wild West style of development in the past.
Writer & Courtesy: The Pioneer