Driving east on the highway from Delhi to the satellite township of Greater Noida, the glass-fronted cityscapes gradually give way to dusty untilled fields where young men wave down cars and push glossy brochures through the window.
"Looking for property?" they ask, pointing to the construction sites along the road, "Two-bedroom? Three-bedroom? There is a special scheme for the Navratras."
There is always a special scheme for property in Greater Noida, a 20,000-acre industrial and residential township on the outskirts of Delhi. The region witnessed an extraordinary spurt in housing projects in the late 2000s as developers drawn by the promise of cheap land signed up buyers in search of affordable homes. The frenzy peaked in the period from 2009 to 2011, before a cooling economy and a court case stalled construction and spooked prospective homeowners.
Last month, the Greater Noida Industrial Development Authority (GNIDA) announced it would right past wrongs by reacquiring farmland in accordance with the new Land Acquisition Act of 2013, but a return to the glory days of the past decade seems unlikely.
Today, over 200,000 apartments are under construction in Greater Noida alone, of which 40 per cent are yet to be sold, according to data compiled by Jones Lang LaSalle Property Consultants (JLL). Housing sales have declined for seven straight quarters, while private developers have completed only 9,690, or 5 per cent, of their promised targets. The significant illiquidity in the market has meant that average property prices have risen barely 14 per cent over seven years.
The data suggests that the arrhythmia of Greater Noida's housing market is not a boom-bust cycle of rising prices followed by a sharp correction, but rather a prolonged slump of low prices and low demand. The supply boom has not been matched by demand, and now builders, analysts and investors are unsure what the market will do when 200,000 housing apartments are finally completed.
"Right now, every builder is faced with a choice: to be a good person and deliver or be a bad person," says a developer with projects across the National Capital Region (NCR), "With 40 per cent unsold inventory, tight credit, and low sales, the incentive to complete a project is minimal." Builder representatives and the Confederation of Real Estate Developers of India did not respond to requests for an interview.
"The NCR's residential boom began after the Wall Street crash of 2008," says Rohan Sharma, associate director at JLL. "Commercial real estate collapsed and builders eyed the residential space." Meanwhile in Greater Noida, GNIDA opened up swathes of land at attractive rates: builders could acquire land by paying 10 per cent of land cost upfront and the rest in 16 installments staggered over eight to 10 years. "A builder needs money for two things: land and construction," explains the developer. "For land, the government gave credit, and construction was financed by end-users who bought apartments."
Flush with credit, developers took on multiple projects and triggered a boom in construction. In September 2009, GNIDA acquired 156 hectares of land around Shahberi village for industrial purpose under the urgency clause of the Land Acquisition Act of 1894. "Under the urgency clause, they didn't record our objections," says Sharafat Ali Khan, of Shahberi village. "But we thought, at least industry will mean factories and jobs for our kids."
Industrial growth would also have a knock-on effect on prices of commercial and residential spaces. "In Gurgaon, demand for residential real estate was driven by employment," says Sharma. "Once the jobs came, people looked to live in Gurgaon rather than commute from Delhi."
But in Shahberi, GNIDA decided to allot the industrial land to property developers instead. Khan and his fellow villagers went to court. Court documents reveal that the land was acquired from farmers at Rs 850 per square metre, and allotted to private developers at Rs 10,000 per square metre. Developers sold their flats at an average price of Rs 30,000 per square metre per apartment. "Everyone was making money except the farmers," says Khan.
"Greater Noida was designed as an integrated township, but industrial land, particularly in Greater Noida West, has been diverted to residential projects" says an official at the GNIDA. "Attracting industry is hard, while cutting plots for builders is easy and lucrative." In the five years, the official ads, GNIDA has allotted 400 industrial sites of which small scale units 50 have started work. "But a majority are micro enterprises employing between 20 and 50 workers each," he says.
In 2011, the Allahabad High Court raised compensation rates in some villages and annulled the acquisition process in Shahberi. Five projects by Amrapalli, Supertech, Panscheel, Mahagun and Gulshan Homes were affected. "But the builders had already begun construction," Khan says, as we walk amidst farmland cratered by excavators. "When the High court cancelled the land allotment by the government, builders started acquiring the same land privately and surrendering it to GNIDA," he adds.
As an example, land records unearthed by Khan reveal that in 2013, a company called Abhimaan Realtech bought 1.3 hectares of land, khasra number 250 and 251, on which Supertech is building a part of its Eco village project, for Rs 13.41 crore from private parties. In February 2014, the company surrendered the land to GNIDA, which paid it Rs 1.44 crore , the rate at which the government would have acquired the land. (As per the Ministry of Corporate Affairs website, Abhimaan Realtech's directors, Sangita Arora and Pradeep Kumar Goel, are also directors in Supertech.) There is nothing illegal in buying land and surrendering it to the authority, but the transaction indicates the difference between the market price demanded by farmers in Shahberi and the price offered by GNIDA. Supertech did not respond to telephone queries or emails sent by Business Standard. The GNIDA too did not respond to calls. In a media interaction, GNIDA Chairman Rama Raman said all acquisition would proceed as per the directions of the court.
On most days Vikas Singh, 23, sits under a flimsy shamiana at the Shahberi roundabout, offering prospective buyers a short tour of the half-built buildings that surround him. In 2008-09, Vikas says, GNIDA acquired his family's ancestral farmland in Bisrek village. "The money went into buying another house and marrying off my brothers," he says, "We thought a factory would come up and we'd get jobs. Instead I got a job slipping property brochures into passing cars for Rs 5000 a month."
Today, he earns Rs 8,000 a month as a sales agent for the housing complexes coming up on the land his father once tilled. "Look, I tell buyers, the building exterior is whitewashed - that means construction is almost complete."
"We have ordered the sharks, and booked a mermaid company," says the young man as we walk through the echoing halls of the Grand Venice Mall in Greater Noida. "We have already carried out a trial for the gondola rides. Everything will come from abroad." Earlier this year, the salesman says, Bollywood actors Parineeti Chopra and Ranveer Singh shot a song for their movie Kill Dil in the Mall's canal. "It was a Venice scene."
In 2007, the Bhasin Group announced "India's first mega tourist shopping destination". The Grand Venice mall and commercial complex is modelled on similar projects in Las Vegas and Macau, with a canal, an ersatz leaning tower of Pisa, giant aquaria, shops, a luxury hotel and a block of offices. Seven years later, the mall shows signs of completion, but the office complex is still a skeletal concrete frame.
Almost 70 per cent of commercial space in Greater Noida is unoccupied, according to JLL data. "My family invested a large amount of money in the project because we were so impressed by this presentation," says Colonel (retd) Gulshan Joneja, who paid a premium on the commercial space for an assured return scheme that guaranteed monthly payouts till completion. In January this year, Joneja says, his payments suddenly stopped. His previous payments came tax-deducted at source (TDS), but on filing his returns, he was informed that the company had not deposited the TDS with the income tax department.
"We formed an investors' group and realised that many people had similar complaints," he says while listing his complaints. "It has been seven years, but the project is still not complete. Work has stalled for over a year. The Bhasins say they do not have money, but they have started a new project in Noida called Mist Avenue." The investors also learnt that the commercial space had been increased from seven floors to 32.
D P Singh, who retired as a civil engineer from the Delhi Development Authority, also invested his savings in the project. "I was living off the monthly payments from the assured return scheme," he said, "We are in a very difficult place."
The Bhasin group did not respond to these allegations. "Sorry I'm late, I was at the golf course," said S S Bhasin, managing director of the Bhasin Group, when we met at the Le Meridien hotel. "We are in a great place to complete this project." Bhasin said his public relations team would respond to specific allegations, but an emailed questionnaire went unanswered. "Right now, builders need new investors to raise capital to complete their projects. But buyers are wary of giving their money to project that will take several years to complete," said the NCR developer. "To get more buyers, builders offer assured return schemes that eat into capital that could be used for construction."
The salesman guides me past the canals and out towards the Mall's entrance. "There was a small money problem, but it has been fixed now," he says. "We will be ready in April 2015." I look back at the gilded, marble and plaster staircase and recall another credit crunch in another Venice. "My ships have all miscarried, my creditors grow cruel," Antonio writes in Shakespeare's Merchant of Venice, "My estate is low, my bond is forfeit."