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There is oversupply of real estate projects in Gurgaon
Gurgaon, from the beginning, has been a builder's paradise. But today the situation is that supply has exceeded demand - in both residential and commercial sectors - and especially so in residential projects. This is because the basic premise that builders work on is first build and then sell.

WHEN THIS happens the presence and entry of investors always creates a fake demand as they want to multiply their money. This often results in delays in projects and the actual user can’t wait for four or five years paying EMIs as well as rentals – thereby truncating a good amount of his salary. Commercial, IT, retail and industrial buildings are also definitely much more in supply than the on-ground demand. Even ready-to-move buildings are lying vacant because of want of takers. Ready-to- move buildings beyond Rajeev Chowk are not being used because of the problematic Honda Chowk.

There’s the cost factor that’s influencing demand. Big BPOs and IT offices are shifting to or opening branches in B-class towns or other state capitals to cut real estate and staff cost. Industries are finding tax-free and cheaper land offers from Uttarakhand and other states.

There are also extraneous factors that are affecting supply and demand of real estate in Gurgaon. Residential projects beyond Sohna Road and Toll Plaza to Manesar and Dwarka expressway may feel the heat because of lack of infrastructure. The longer the time of delivery of projects the more the unwanted cost to the builder and the consumer. The only soothing factor is price rise because of shortage but that too is created and not actual.

Given this situation, any further slowdown in the economy will give a big jolt to this industry as it has no standard projected demand, and every builder, big or small, wants to make more money by launching more and more projects but this may make them cash-starved. Nevertheless, in the overall scenario, there is growth of demand in Gurgaon as the city is the biggest hub of MNCs and big Indian companies in almost all fields. But supply is definitely more than demand.

A bright spot in the real estate industry in Gurgaon is that quality consciousness has improved a bit because of more educated persons joining this field but it is still not as organised as the IT, telecom, auto and FMCG industries. Also, most of the entrants in the real estate industry are working directly for consumers and not for hoarders or speculators.

The improvement in the real estate industry will be incremental and will take time. Meanwhile, solutions to current problems are only possible with scientific regulations initiated by the government – and some suggestions are:

  • Each nuclear family should be allowed to buy one house - cutting fake demand to a real one.
  • Transfer of property should be allowed after possession - discouraging speculators who exit after paying 3-4 instalments.
  • Banks should come forward with subvention schemes for the benefit of actual users with delivery period less than 2 years. Late penalties should be imposed on builders by way of interest payable by them in place of users.
  • The builders should work as professional companies applying proven techniques and excelling in mass and fast production of homes with less expensive material developed through their own R&D. 

Hopefully, companies such as Tata, Godrej, ITC, and Mahindra, and reputed builders in the trade with large chunks of land can take the initiative with the help of banks to encourage actual users. But as of now supply is more than demand mainly in projects launched after 2008 but investors with deep pockets can sustain themselves – leaving many starving for their basic right of an aspired home.

CJ: Vimal Kant, 63-years-old, loves literature, and started in the real estate business as a developer in 1988. Today, he is a real estate consultant and the CEO of real estate solutions company Aspirations.

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