Mumbai/Singapore: Lalit Vazirani, a computer programmer from Mumbai, never reckoned on having to turn amateur property developer.
Yet here he is, a decade after putting down a deposit for an apartment near the city's airport, dealing with architects, taxes, various planning permissions and even court hearings. All because the developer behind the $50 million project has gone bust, and nobody else has stepped in to finish the work.
"We never in our wildest dreams imagined one day we would take on the functions and the role of a developer," said Vazirani, 45, who bought the two-bedroom unit before construction started. "But fate had other plans."
Few things illustrate the malaise in India's property market as starkly as would-be homeowners having to dedicate untold hours to completing the flats they spent years saving up for. While no estimates exist for the number of people in Vazirani's position, India's property market is struggling to digest some $65 billion worth of projects in various stages of completion—or, in many cases, non-completion.
It's an issue with the potential to sap confidence among house buyers, further complicating developers' attempts to claw their way out from under a mountain of debt.
So many delayed building projects have "severely weakened faith in any under-construction properties and reviving buyers' trust is a Herculean task," said Anuj Puri, the Chairman of Anarock Property Consultants Pvt. "If buyers stop purchasing, builders will have a far more challenging time to get funds from external sources for construction."
An analysis of about 11,000 home builders by research firm Liases Foras in February showed that developers on average have to repay twice as much in debt each year as the income they generate that can be used to service it. This comes as property prices in biggest cities are flagging—home values in Mumbai sank 11 percent last year following a 5 percent decline in 2017. They ran up 32 percent in the four years through 2016.
Vazirani is one of 281 buyers who banded together to complete their development, which currently consists of the skeletons of six buildings standing on an otherwise deserted site. Developer Orbit Corp., which specialised in mid- to high-end apartments, collapsed in 2016.
He's not alone. Home buyers at a Nirmal Lifestyle project in the northeast Mumbai suburb of Mulund are lending the developer more money so it can complete the final stages of a tower. At a housing development in Uttar Pradesh, purchasers will monitor construction after a local regulator stepped in.
With would-be home buyers reluctant to hand over cash for deposits, the funding horizon for developers looks bleak. Builders' debt repayments amount to $18.5 billion each year, the Liases Foras data show. On top of that, some lenders have sharply increased the interest rates they charge developers for new loans. Already, around 235 realtors are under the NCLT.
— Bloomberg
