Why Developers Fail to Complete Projects on Time?

The real estate market is witnessing low transaction movement from investors, which in turn has landed developers in a cash crunch situation, resulting in delay in projects. "The market was sluggish last year and this led to a dip in transactions. This put pressure on prices, which led many investors to hold back payments for their apartments. Cyclically this squeezed the investment into construction activities... hence delays. This seems unfair upon developers. When prices are risky, investors earn handsome profits in the resale market. In times of correction of prices, investors are slow in payments of dues," according to Kunal Banerji, the president of M3M.

 ‘Inexperienced developers’ are also contributing factor to the project delay situation. As they vouched for the opportunity when the real estate market was in cheerful mode but now the same developers are mostly facing the axe. Manoj Goyal, senior vice-president of Delhi-based Raheja Developers cited that "Many developers in the market who are inexperienced and do not have the resources to build large-sized projects entered the market when the going was very good. But then recession struck and they failed to manage their cash flows and due to lack of credentials, the banks and financial institutions did not extend funding to them. As a result they were forced to stop the construction. Now most of them are either exiting from those projects by selling them to reputed developers or are trying to manage funds at any cost."

According to Kaustuv Roy, the executive director of Cushman & Wakefield India, stated that "Developers must first get all the legal, regulatory and statutory clearances and only then announce a project. This will avoid or minimize delays in project completions. Also, ideally, they must secure the required finances from funding institutions."

"It is sad to see how developers keep repeating the same mistakes. Developers know that regulatory approvals take time, so they must have a buffer period; if they feel they can complete a project in two years, they should commit for three years. The 'shortage of raw material' is eyewash. Customers who pay EMIs have their own set of challenges, but they somehow manage to stick to their commitment. Likewise, developers must also budget for possible fluctuations. Also, banking on only project sales to generate funds is to invite your own misfortune," according to industry experts, reports Economic Times.