Builders Heave Sigh Of Relief As SC Lifts Construction Ban In Maharashtra, Uttarakhand

If developers were working hard to finish their already pending-for-years projects, the Supreme Court (SC) decision to ban construction in four states —Maharashtra, Uttarakhand, Chandigarh and Madhya Pradesh — dropped at them like a bolt from the blue on September 3. The ban, imposed by the top court over states’ failure to notify waste-management policy, would extend delivery datelines further, sector experts opined.

On September 5, however, the top court lifted the ban in Maharashtra and Uttarakhand, much to the relief of the developer community, especially in Mumbai. Private estimates show India's financial capital has an inventory of 119,526 units and records a 21 per cent vacancy in flats even as prices reduced in the past.

The SC breather to the two states came after it was informed that they have drafted their respective solid-waste management policies. 

“ If the ban is not lifted, it is going to be chaotic. You cannot imagine the loss. I was just trying to think of how many workers would be affected. In the Mumbai region alone, we have four lakh workers on infrastructure and housing projects. They will be out of job from tomorrow onwards,” Hiranandani Communities Chairperson and Managing Niranjan Hiranandani had earlier said.

Uncertainty prevails

The cascading effect of the ban is going to be significant in Madhya Pradesh and Chandigarh, states which have yet to follow the SC directive. Property markets just emerging from the slump may find themselves in a tight spot, for one.

When the National Green Tribunal (NGT) , for instance, banned construction in the Noida area in August 2013, no construction activity took place for 77 days. This NGT decision came after the Uttar Pradesh government failed to notify the eco-sensitive zone close to some housing projects. Even today, Noida remains the micro-market with the largest stock of unsold inventory. No amount of interest waivers to affected housing projects could help Noida regain its vitality for long. The industry body fears that even a month’s ban may have far-reaching consequences.

Growing penalties

Delay in project delivery also means builders will have to shell out huge amounts of money to pay as penalty to homebuyers under the provisions of the real estate law.  

Mriganshi Kriti, a homebuyer and advertising professional based out of Mumbai, says, “It is not only about the builders. Homebuyers like me are also in a bad spot because we are at the receiving end.”

“If the RERA provides relief to builders based on the fact that the delay was due to the SC verdict, builders may get away without compensating the homebuyers.”

Estimating the loss

There are several other implications, too. After the NGT ban, for instance, the loss to the local economy was to the tune of Rs 2,000 crore, says Credai Vice-President Amit Modi. Collectively, Maharashtra, Madhya Pradesh and Uttarakhand account for 15 per cent of the Gross Value Added (GVA) from construction. The subdued market conditions had already led to a decline in the GVA, which stood at 7.4 per cent in 2017-18. In FY12, it stood at 9.6 per cent. Impact on the ban would be evident here, too.