According to data published Gurgaon based research company, PropEquity Analytics, it is estimated that 4.80 lakh residential units across affordable, mid and luxury housing segments, scheduled for completion during 2011-13 will be delayed across 11 cities - Chennai,Gurgaon, Noida, Greater Noida, Mumbai, Navi Mumbai, Thane, Pune, Bangalore, Hyderabad & Kolkata.
Double Loss..!
If any one have invested in a real estate project, he/she would not want it to get delayed for obvious reasons. Another reason why any one should run thorough checks at the time of booking a flat. If any one have taken a housing loan, he/she would end up paying a higher interest amount in a delayed project compared with a project that's completed on time. It's a double for a first time house buyer living on rent.
On the one hand, he/she pays the rent and on the other hand he/she has to pay his/her EMI's (Equated Monthly instalment's) for an extended period of time be cause of the delay.
When any one opt for a CLP (Construction Linked Plan), which is usually the case, the housing loan is disbursed in parts to the builder/promoter at different stages of construction. For example, one part may be disbursed when the builder lays the foundation of the residential complex.
While any one start paying his/her EMIs during the construction phase, these are only pre-EMIs and the actual EMIs start only after he/she get the possession of the house. The pre-EMIs charge only the interest accrued on the amount disbursed till then.
Also, they constitute only the interest part of the housing loan. The real loan repayment, including principal, starts when the entire loan amount is disbursed to the builder/promoter.
Additional Interest..!
Any one have taken a CLP. It assumed that the project was delayed by 12 months. When the delay happens, the pre-EMI gets fixed at the last number and the cycle restarts only when the construction restarts. So if part of the loan is to disbursed at the time of completion of interior works but the the work delayed, the pre-EMI will remain at the level it was at the previous stage.
It will go up only when the builder completes the works level and gives a completion certificate. Since banks disburse the housing loan based on the completion certificate, any one will continue to pay the pre-EMI interest based on the previous disbursed amount till the time the builder/developer/promoter resumes construction.
The longer work delay, the later would the disbursement loan partly amount, cycle start and in the interim, any one continue to pay additional interest on the amount already disbursed.
Tenor Increase..!
Also the work delay affects tenor. The actual home loan tenor remains the same, the overall loan tenor increases since the tenor of the pre-EMI increases. The housing loan tenor is counted only after you get the possession and the actual EMI starts.
While it is mandatory for builders/developer/promoter to include a penalty clause, it does not kick in immediately.
Under the penalty clause, the developer/developer/promoter is supposed to pay you a compensation in case of a delay.
Along with the completion date, most developers include a grace period of 3 to 6 months. The penalty clause will get invoked only after this grace period.
Rate of Compensation..!
Normally, the rate of compensation is usually about 7% (It may be mention in buyer agreement, Otherwise please add this clause at the time of buyer agreement writing ) for each month of delay. On the other hand, the housing finance companies/bank's loan rate is higher at about 10.5% to 11%.
In India Developers/promoters who offer realistic time lines about 18 to 30 months for delivery can be considered credible. In general, any project should take between 24 months and 36 months to full complete.
To avoid this bad situation, check on the credibility of the developer/builder/promoter.
Double Loss..!
If any one have invested in a real estate project, he/she would not want it to get delayed for obvious reasons. Another reason why any one should run thorough checks at the time of booking a flat. If any one have taken a housing loan, he/she would end up paying a higher interest amount in a delayed project compared with a project that's completed on time. It's a double for a first time house buyer living on rent.
On the one hand, he/she pays the rent and on the other hand he/she has to pay his/her EMI's (Equated Monthly instalment's) for an extended period of time be cause of the delay.
When any one opt for a CLP (Construction Linked Plan), which is usually the case, the housing loan is disbursed in parts to the builder/promoter at different stages of construction. For example, one part may be disbursed when the builder lays the foundation of the residential complex.
While any one start paying his/her EMIs during the construction phase, these are only pre-EMIs and the actual EMIs start only after he/she get the possession of the house. The pre-EMIs charge only the interest accrued on the amount disbursed till then.
Also, they constitute only the interest part of the housing loan. The real loan repayment, including principal, starts when the entire loan amount is disbursed to the builder/promoter.
Additional Interest..!
Any one have taken a CLP. It assumed that the project was delayed by 12 months. When the delay happens, the pre-EMI gets fixed at the last number and the cycle restarts only when the construction restarts. So if part of the loan is to disbursed at the time of completion of interior works but the the work delayed, the pre-EMI will remain at the level it was at the previous stage.
It will go up only when the builder completes the works level and gives a completion certificate. Since banks disburse the housing loan based on the completion certificate, any one will continue to pay the pre-EMI interest based on the previous disbursed amount till the time the builder/developer/promoter resumes construction.
The longer work delay, the later would the disbursement loan partly amount, cycle start and in the interim, any one continue to pay additional interest on the amount already disbursed.
Tenor Increase..!
Also the work delay affects tenor. The actual home loan tenor remains the same, the overall loan tenor increases since the tenor of the pre-EMI increases. The housing loan tenor is counted only after you get the possession and the actual EMI starts.
While it is mandatory for builders/developer/promoter to include a penalty clause, it does not kick in immediately.
Under the penalty clause, the developer/developer/promoter is supposed to pay you a compensation in case of a delay.
Along with the completion date, most developers include a grace period of 3 to 6 months. The penalty clause will get invoked only after this grace period.
Rate of Compensation..!
Normally, the rate of compensation is usually about 7% (It may be mention in buyer agreement, Otherwise please add this clause at the time of buyer agreement writing ) for each month of delay. On the other hand, the housing finance companies/bank's loan rate is higher at about 10.5% to 11%.
In India Developers/promoters who offer realistic time lines about 18 to 30 months for delivery can be considered credible. In general, any project should take between 24 months and 36 months to full complete.
To avoid this bad situation, check on the credibility of the developer/builder/promoter.
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