Roadblocks Faced by Real Estate Developers in India

Currently, Housing is considered to be a worthwhile investment for Indians. As a result, the real estate companies are exploring several opportunities in the suburban areas to create an impression. That said, according to Indian Brand and Equity Foundation, the housing sector will contribute 5-6 per cent to the country's Gross Domestic Product (GDP).  By 2020, the India real estate market is anticipated to reach US$ 180 billion by 2020, according to Indian Brand and Equity Foundation.

Propulsion of growth in real estate sector may be expected, however, these are the hurdles and challenges faced by real estate players in India.

Risk of default:

The final handover of the house to the buyers has become a major cause of concern. The builders who stand by their commitments are performing much better than the other builders. In recent times, the deferral of handling of projects on time, has led to poor demand. As a result, the inventory of the developers has increased, resulting in a lot of turbulence. Importantly, banks are apprehensive of granting loans to some of the builders as they have failed to pay the earlier loans. Subsequently, loans have been classified as non-performing assets (NPA).

Moreover, several litigations have been charged against developers by bankers, creditors and investors. For every investor, the logjam in construction has become a major roadblock as funds have been blocked and the handover of possession has been differed for an indefinite period. Due to this, investors are entangled in a cobweb.

Delay in obtaining sanctions:

Over the past six decades, red tapism in Indian economy has been the moral fabric. The government corporations and local authorities have not taken adequate steps to propel the growth of the private sector. At present, a lot of time is consumed by the developers in obtaining Intimation of Disapproval, Occupation Certificate or Completion Certificate. This leads to an increase in costs of the projects.

Advertising and marketing:

The decision to advertise through various means, such as print or digital medium seems to be a difficult task. At the same time, recovering money from the buyers is a difficult proposition for the developers.

Absence of clarity:

Encroachment of land, lack of regulation acts as a hurdle for foreign investors who wish to make an investment in Indian real estate. In fact, a self-governing body assessing the value of lands according to the international standard is required to bring visibility in land reforms.

Land rates:

The government has a plan to ensure housing for all by 2022. Coordination between the government and the private players based on the public-private partnership (PPP) model will be a difficult task.

Limitations placed by local authorities:

At times, the local authorities like BMC have restrictions in regards to play grounds or parks. To counter such issues, real estate players showing bank guarantees to the local authorities is stressful.

Lack of clear land titles: 

Due to substandard record keeping and division of land in several parts, land titles are not clear. That said, land records being modernized at a snail’s pace is causing a hurdle.

Speculation on Real Estate Prices: 

Over the past few decades, the value of land has increased by an astronomical margin. This has resulted in a surge in residential or commercial property prices. Moreover, properties are bought and sold by the brokers with their investments, leading to an increase in property prices.

Approvals and procedural snags: 

Before working on a project, many approvals are required from the government departments. This causes a lot of corruption coupled with delays in the real estate sector. All this causes a lot of trouble to the customers, who spend their precious time and money in investing in a home.

Conclusion: Real estate developers in Bangalore and other players across the various parts of the country will continue to face hurdles, but it is the duty of the government to be proactive and propel growth in this industry in the days to come!

Guest post published by Adarsh Developers