It is difficult to run into somebody in Delhi you know and not have them confess that they too are caught with their money stuck in stalled real estate projects in the suburbs of Noida and Gurugram. The bankruptcy process in the Jaypee Infratech Ltd case got the headlines, but the number of large developers in jail is not small. It includes companies such as Unitech, SRS Group and DB Reality, showing how deep the rot in real estate goes because rich people in India seldom go to jail for breaking the law.
Stuck in the still-to-be-Italian-marbled buildings are the savings of the urban mass affluent Indian who thought she was investing smartly in the property boom. Investors bought into the good deals offered by builders who offered to pay their first few EMIs (equated monthly instalments), who offered post dated cheques for those EMIs, who offered a free car if you booked a flat above a certain value. Real estate investors who bit the bait allowed themselves to believe deals too good to be true, to be true. They refused to listen to sane counsel of friends and newspaper articles that warned them against such deals.
But that was some years ago and builders seem to think that the memory of the big real estate crash is fading. The past few days have seen full page jacket ads of real estate companies that promise to pay your rent if you just give the first down payment for a future project. This time there is a sweetener in the deal—the project is RERA compliant. (RERA or Real Estate (Regulation and Development) Act, 2016 is the new real estate law that came into place on 1 May 2016, with one year given to states to formulate their own versions of the central law). Builders are increasingly using RERA compliance to sell projects. Read More