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Delayed delivery: Developers' story

27th July, 2016

The Times of India

Buyers are at utmost loss due to delayed delivery. But how developers are also not spared due to inordinate delay in delivery of projects?

Buyers are at utmost loss due to delayed delivery. But how developers are also not spared due to inordinate delay in delivery of projects?
It's often said that delayed delivery causes utmost difficulty for the buyers. But developers are equally affected in case they fail to deliver projects on time. This is more so in case of those developers who want to stay in the market for a longer period of time. It may not affect the fly-by night builders but for those who count credibility a lot, delivering projects on time enhances trust and credibility. This also means a huge financial drain on the part of the developers. Rupesh Gupta, director, JM Housing, says that in a delayed delivery, apart from the credibility of the developer being tarnished, a lot many things are going simultaneously. "The repayment of loans which were borrowed in order to complete the project gets delayed ultimately resulting in the overall delivery cost of the project shooting up. Delayed delivery also results in capital depreciation of a project which may fuel early exits of investors as the return on investment start to take a hit," Gupta points out. Delayed projects harm small developers even more who try to complete the existing project first instead of launching multiple projects simultaneously. After completing one project, such a developer moves on to next project. But if the first project itself is delayed, the planning and financial stream of his upcoming project get disturbed.
Another developer Manoj Kumar Singh, chairman, Mangalya Group, says, "Although erosion of credibility hurts developer the most there are other losses which the developer has to bear in case his project gets delayed. In fact, a smaller developer with limited resources has to tolerate greater impact due to delays." Agarwal is quick to add that no reputed developer would ever like to delay any project deliberately, because it ultimately results in a dent in his credibility and the erosion of the credibility hurts any prominent developer the most.
Manish Agarwal, MD, Satya Group and VP CREDAI NCR, notes, "Besides negatively-impacting credibility and goodwill, delay in delivery of projects ultimately results in huge financial losses for a developer. Delay in delivery makes the developer immediately pay the penalty to the buyers and bear accumulating high interest on construction loan. Apart from all these, a developer has to also battle with the rising costs of construction material and labour due to construction delay."
Vikas Pundir, CMD, SKB Group, says, "The biggest dampener in case of delayed delivery is the chances of end-users cancelling bookings. Also, the developer being the end-user for so many allied industries, the developer is bound to see price appreciation in either of the segments which will ultimately result in its costs going up. They put a developer in a tight spot as cost escalates impacting the fund flow."
Gaurav Gupta, general secretary, CREDAI Raj Nagar Extension, outlines some of the factors leading to delayed delivery that include tight credit conditions, time consuming and lengthy process of getting approvals, land issues, strikes or labour issues among others.
Gupta further says, "These inescapable delays force developers to extend the time limits of giving deliveries. These kinds of situations spoil trust and credibility factor among buyers and leave a dire effect on the goodwill of developers. Such delays also effect the overall business operations as well as turnover. The delays may lead to cost escalations in construction materials and labour."
Adding on to Gupta, Prashant Tiwari, chairman, Prateek Group, points out, "There are many factors leading to delay in deliveries that are beyond the control of developers. Delays not only dent the credibility but also add up to the cost of the project. This scenario thereby creates a vicious cycle wherein developers have to increase the cost, which is held against them only."
Admitting that developers won't delay delivery of projects intentionally, Tiwari says, "With so much at stake, developers would not want to delay their projects intentionally as they eagerly wait to move on to other projects to earn more goodwill and business." Even at a time, when there is so much uproar for delay in deliveries, few developers have been able to keep their words to the buyers, adds Tiwari.

Keywords: Delayed delivery

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