Friday, November 9, 2012

Why real-estate projects get delayed

Real-estate development in India is often criticised for poor planning which results in delays in project completion, much to the chagrin of the customers. While some reasonable delay in the projects is understandable, there are delays beyond a reasonable time frame which annoy the customers a great deal. There are provisions in the laws wherein the builders are required to pay the compensation amounts to the buyers, if the projects get delayed beyond a specified time. But, have you ever wondered what are the real reasons for the projects to get delayed? Were these reasons within the control of the builder? A look at these reasons can help you determine whether the delay was due to some justifiable reason or due to poor planning and management of the builder. Some of these reasons are examined below:

1. Weak supply of inputs: There are times when, due to a lot of demand for the construction inputs and equipment, there is a shortfall in their availability. This puts a big constraint on the project timelines as the construction activity can not proceed in the absence of these inputs. This factor is not easily known to the common investors and it is only when the builders offer clarifications on this reason that it becomes known to the investors or buyers. This reason can not be attributed to the poor management of the builder since the builder is expected to have explored all the options for meeting this shortfall.


2. Less Sales: If the sales of the units of the residential units pick up, such as at SRS Royal Hills Faridabad, then there is a good flow of funds which speeds up the construction activity. However, when the demand is sluggish and there is not enough sale of the units, then there is cash flow crunch which delays the project as financial constraints become overwhelming.

3. Under-developed region: Development of an area or region, especially in terms of infrastructural facilities such as roads, electricity, sewage, water supply, etc, plays a direct and significant role in the timely project completion. Due to the lack of development on these fronts, say for laying down of roads, even the builders would be reluctant to initiate the project till the time the road level is not decided. Fast infrastructure development leads to increase in number of queries and brings in more bookings. This acts as a catalyst to the builder to complete the project in time. But, development of infrastructure is the responsibility of the state and the real-estate project owners such as SRS Royal Hills do not have much control over this factor.

So, when your project is getting delayed, you shall first approach the builder directly and seek the reasons for the same. The builder shall be able to provide a reasonable, practical and verifiable reasons of the same.