Most of them lack basic infrastructure support, have serious construction flaws and are not RERA compliant
Around 2.37 lakh units priced below Rs 40 lakh across top seven cities remained unsold as of the second quarter of 2018, a report has said. Lack of basic infrastructure support, serious design and construction flaws, pre-RERA launches or banks denying home loans owing to legal flaws contributed to the inventory buildup, according to a report by ANAROCK property consultants.
These affordable units were located in cities such as Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Bengaluru, Pune, Kolkata, and Hyderabad. This number pertains only to the unsold units of organised private developers and not government housing schemes, which means that the number would go further northwards if those are included, the report states.
Given the unrelenting requirements for urban budget housing, inventory that had been created in the major cities by seasoned organised players who knew what they're doing will eventually get absorbed. But projects generated by the unorganised sector — the innumerable smaller buildings, often one-off undertakings by fringe developers in far-flung areas contribute the major share of stock which lies idle — and may continue to lie idle - in the post-RERA era, says Anuj Puri, Chairman - ANAROCK Property Consultants.
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Most of these budget houses remain vacant because the developers had not undertaken thorough feasibility studies prior to launch. They just went ahead with launching affordable housing in an area because land was cheap and local development regulations were lax. They were either too far from the city's workplace hubs or lacked the necessary support infrastructure, the report says.
Many such projects had serious flaws in design and construction and were launched before RERA hit the market. RERA also applies retrospectively to under-construction projects and is very strict about factors like construction quality. Overtly inferior construction will not pass the RERA scanner and cannot even be marketed, leave alone sold, it says.
RERA is also strict on projects which were launched without all the necessary approvals in place (and also on non-approved floors in otherwise approved projects). This obviously makes homes in them unattractive to buyers, who will shun them in favour of fully-compliant developments.
“It could be argued that projects with such drawbacks should have found buyers before RERA kicked in - after all, they are invariably very affordably-priced and there have always been unwary buyers who do not look beyond this all-important factor. However, even if consumers don't do a thorough due diligence, banks most certainly do. Intending buyers would not have been granted home loans if there were serious flaws in the project,” explains Puri.