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With under-construction projects in limbo, buyers choose ready possession flats

There are many buyers who booked the flat and are paying installment, but the projects are not developing as planned.

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Dinesh Shah (37), a resident of Navi Mumbai, had booked a 2-BHK flat in 2012 in a reputed developer's project. The developer had promised the possession of the flat in 2015. But the developer has only completed the plinth as of date. The project has been stuck because it has yet to get an environment clearance NOC. Shah is paying rent as well as EMI, and not sure when he will get the possession of the flat.

Shah's is not an isolated case. There are many buyers who booked the flat and are paying installment, but the projects are not developing as planned. "We are not sure whether the developers will complete the project or not. The same thing has happened with other buyers and developers. The market is really in a bad shape," said a real estate watcher.

Niranjan Hiranandani, co-founder and MD, Hiranandani Group told dna that the approvals are the biggest headache for developers. "We have to run pillar to post to get approvals. The file does not move fast. Due to the approval procedures, the projects are getting delayed. In fact, we want to complete the project on time because if the project gets delayed, that escalates the total project cost," Hiranandani said.

Manohar Shroff, Secretary, Maharashtra Chamber of Housing Industry (MCHI), Navi Mumbai, said that the real estate industry is facing tough times. "Sale are not happening at under-construction projects, because a lot of risk is involved. There are chances of the developer leaving the project mid-way or delaying it for an uncertain period. So most inquiries in the market are for ready possession apartments only. Whatever sales are happening, they are in the ready possession segment only. The buyers are having very bad experience of under-construction projects," said Shroff.

Atul Nemade, property expert, said that the primary disadvantage of investing in an under-construction project is that the property cannot be immediately used for occupancy or renting out. "The buyer's money gets locked into a non-performing asset and there may be delivery delays or sometimes even defaults, which can have serious financial repercussions. So buyers are cautious and do not want to burn their fingers. In ready possession, the buyers pay additional money but get the house in their possession," said Nemade.

He said another important problem with under-construction projects is funding. "Developers may skimp on construction costs, banking on the buyer's ignorance of quality parameters. The design of the plan submitted to municipal authorities may not sufficient or get rejected. That leads to non-approval of their projects. There are also fly-by-night operators, who pocket their clients' up-front payment and then disappear altogether. All these reasons push the buyers for ready possession in the current market scenario," said Nemade.

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