India’s real estate sector is grappling with a severe crisis, as nearly 2,000 housing projects across the country have been stalled over the past eight years, impacting the hopes and finances of countless homebuyers.
According to a recent report by PropEquity, a real estate data analytics firm, approximately one in five under-construction homes nationwide have come to a standstill, with over five lakh housing units currently affected. The report, released on August 15, 2024, presents a grim picture of the Indian housing market. It reveals that 1,981 projects across 44 cities have been stalled, affecting both homebuyers and developers. This represents a significant increase from 2018 when 465,555 units were reported as stalled, with the figure now reaching 508,202 units by July 2024, marking a 9 per cent rise over the past six years.
Mumbai, India’s financial capital, has the highest number of stalled projects among Tier-I cities, with 234 projects currently on hold. Bengaluru follows closely with 225 stalled projects. Greater Noida in the National Capital Region, however, leads in terms of the number of stalled housing units, with 74,645 units spread across 167 projects, representing 17 per cent of all stalled units in Tier-I cities. Tier-II cities are not immune to this crisis. Bhiwadi, a burgeoning real estate hub, tops the list with 13,393 stalled units across 33 projects, accounting for 18 per cent of the total stalled units in this category.
The report attributes the stalling of these projects primarily to the lack of execution capabilities on the part of developers, coupled with cash flow mismanagement and the diversion of funds to acquire new land banks or to service other financial obligations. This has left homebuyers in a precarious position, waiting years for their promised homes, while developers struggle to meet their commitments. PropEquity’s spokesperson emphasised the need for an independent third-party audit service to empower homebuyers. Such a service would provide them with critical information on developers’ capabilities to complete projects on time, thereby enabling informed decisions.
In a bid to address the mounting issue of stalled projects, the Indian government launched the Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund in November 2019. The SWAMIH Fund has raised INR 15,530 crore to date, aimed at completing stalled projects. However, the progress has been slower than anticipated, with only about 32,000 units completed in the past five years. The Fund has set an ambitious target to deliver 20,000 homes annually over the next three years, but given the current pace, achieving this goal seems challenging. The ongoing crisis has also led to a surge in real estate disputes in various courts, putting additional pressure on homebuyers to conduct thorough due diligence before making property purchases.
The PropEquity spokesperson highlighted that as the real estate sector continues to face cash flow and delivery challenges, the impact on homebuyers remains a significant concern.
