As builders fund parties, homes may be delayed
Apr 12, 2014
Source : The Times of India

BANGALORE: Real estate consultants caution that the ongoing polls could cause project delays as election financing and delayed approval processes are coming in the way of construction activities.

In an analysis of the connection between the property market and polls, Ramesh Nair, COO (business) at India's largest property consultancy firm JLL, says many developers who are funding candidates are delaying their projects due to the lack of liquidity.

"In every election season, money is sucked out of the real estate sector because most developers are either directly or indirectly connected to politicians," says Prashanth Sambargi of Mars Realty. Most often, the land aggregator or the primary landowners of a project have political links.

Delayed delivery of residential projects has become a major issue in the real estate sector. While in Gurgaon only one-third of the committed residential supply for 2013 was delivered, in Noida, only one-fifth was delivered.

Nair's assessment is that the property market has become a key election financier. "Given this situation, many developers cut down on new launches and focus on selling their existing inventory," he said.

The delay in launches is also directly linked to a slowdown in the approval process in the run-up to elections. "There seems to be a great deal of confusion with regard to granting sanctions as well as a general understaffing of qualified staff to close files," according to Alexander Moore, CEO of L J Hooker India.

Samir Jasuja, founder of real estate research firm PropEquity, says homebuyers, too, have adopted a wait-and-watch policy that, along with other factors, has resulted in a significant inventory build-up. JLL reports that Mumbai has an inventory pile-up of close to 48 months, Delhi of 23 months and Bangalore of 25 months.

"Some of the most vibrant residential markets, like Mumbai and NCR, have witnessed a drop in sales volume of nearly 50% and 30%, respectively," says Samantak Das, chief economist and research head at property consultancy Knight Frank India. He believes consumer sentiment will revive only in the third quarter of this calendar.


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