Looming elections may stall realty projects

The stage is all set for national elections in the country as different political parties pull up their socks and get ready to roll. In a move to win the rat race, decisions are taken which have put the public interest on the backburner. This, has injected a massive resentment among the industrial circle and the Indian realty sector is no exception. With hardly any new project springing up, and a slump in sales has compelled the builders and developers to feel the heat of liquidity crunch. But the question of the hour is-how general elections will impact the realty sector in India?

As per the realty developers, the cost of numerous residential projects across major cities have witnessed a sharp escalation, since officials are holding down the routine approvals, quoting the election code of conduct. As per market reports, on account of such code of conduct, construction work has gone for a toss in cities like Bangalore, Mumbai, Ghaziabad, Noida, Pune and Gurgaon. Deployment of the officers for poll duties and lack of clarity on how to handle the routine matters like building approval have emerged as the primary reasons for delay.

Matter of grave concern

A deep insight on the present scenario of the realty market laps up the fact that the elections code of conduct in the country have stalled more than 50 residential projects which come under Gurgaon, NCR and Faridabad. With the advent of elections, the approval process hits a slow button, which is likely to drag the sector and increases the cost burden simultaneously.

Furthermore, 7 out of 10 officials are put on election duty, which implies that they will not be available for normal duty. As per property consultants, even the absence of one official can cost the approval process and derail it significantly. Owing to it, investors across the cities who purchased numerous apartment for promising returns in the past, now prefer to maintain a safe distance from the market, since they fail to exit their previous investments.

Impact on real estate

A delay, as long as two month, in procuring the approvals will lead to cost escalation of 5-6% in a project that will eventually increase the onus of the developers. As per market reports, home sales across the nation has been hit with a slowdown in the last 12-48 months and inventory levels have hit the roof. As per Liases Forbes, unsold inventory stood close to 709 million sq ft in the last quarter to 2013. With the slump in sales due to the election code of conduct, inventory will need additional 30 months to sell out.

Worse, the real estate sector is already enduring the pain of labor shortage of nearly 40% on account of various reasons and the advent of elections have further deteriorated the situation. Be it Lok Sabha or state election, it usually involves movement of a number of workers back to their natives and towns, which affects the construction work in the country adversely. Slow economy and lower investor confidence has already taken a toll on the Indian real estate market and an additional delayed approval (on account of upcoming elections) will generate a negative sentiment for the sector, irking the customers.