ROADS OF OPPORTUNITY OR DESPAIR

During the heydays of UPA government, they announced some important and mega infrastructural game-changing roads. These were touted as the roads that will catapult India into the next orbit of economic growth.

This was a time when the world was hailing India as the most upcoming economy and the new driver of the world economy.

The works started and there was a lot of euphoria around the development of these roads. For the sake of understanding and focusing on the concept, one would take 03 roads from and around Gurugram (Gurgaon).

They are:

  1. the WPR – Western Peripheral Road (aka Kundli-Manesar-Palwal) Expressway
  2. the SPR – South Peripheral Road (aka Golf Course Road Extension Road)
  3. the NPR – Northern Peripheral Road (aka Dwarka Express Way).

These three roads were duly announced and lapped up by smart marketers.
As all smart marketers are, wont to do the benefits of the said roads were duly exaggerated and downloaded to the buyers. The same pitches were then naturally adopted by all other players viz Builders, Brokers, Vendors and of course the buyers. In all fairness, all these players believed in the stories they were telling each other.

Tell a story too long – it becomes the truth…

Property Advisor

Slowly the noises rose into a cacophony and all voices of reason were drowned. The Euphoria was such gigantic that people, including builders, started making purchases as if there was no tomorrow. A slew of projects, almost one every week similar to a weekly movie release, was launched with the promise of returns based on the commissioning of these iconic arterial roads.
The music continued for quite some time resulting in Thousands of investors, pumping in at least a five billion Indian rupees alongside these three locations.

…but not for long

Then the inevitable happened. The Roads, like a majority of government projects, took a life of their own and started getting delayed. As of today none of the 03 Roads, the KMP, the Dwarka Expressway or the Golf Course Extension road is complete in all aspects.
This is when all the three roads have been delayed by more than 150% in terms of time and have already overshot the costs by more than 100%. Also, it would be a miracle if any of these roads get completed and commissioned in the next 2-3 years.
The implication of these delays is that all other “Potential” growth based on the completion of these roads has been delayed sine die. All those additional peripheral roads, the commercial/social infrastructure, the residential development (to include the residents who will live in the completed projects) and the allied incidental growth have been severely negatively impacted.

Home Buying Decision

The real estate prices have plummeted causing losses and heartburn to investors and pushing builders on the verge of defaults.

Case Study

A case in point is a “Puri Diplomatic Greens” on the Dwarka Expressway which was launched with much fanfare at price of 7400 per sq ft. It is now available at 7200 per sq ft. This is when the project has been completed and after a gap of 5 years. Therefore, there clearly is a loss of about 40% to initial investors taking into account the cost of money. (To my analysis this is still overpriced and can be bargained down further).
Another project by “Godrej Properties” by the name of “Summit” which was so heavily subscribed initially that Godrej had revised rates of phase 01 launch by about 02 times in less than a week.
Now, this same project is available on the market at 40% discount after being completed. So, even marquee developers like Godrej and completion of projects are no guarantee of returns on investments.

What is the future?

Rera

Well, I am confident that these 03 roads namely the KMP, Dwarka Expressway and the Golf Course Extension Road will eventually get completed.
What I am not sure of is the exact months and years when they will get completed but a rough guess would be something like this KMP about 30-36 months from now, Golf Course Extension about 18-24 months, Dwarka Expressway 40-48 months.
Now one must also admit that there can be delays even on these estimates. So the future for sure holds promise but with uncertainty.
Uncertainty is what makes the investment world interesting while also scaring a lot of buyers.

So what lessons do we learn?

Real Estate Companies in India

The lessons learnt are as follows.

  1. Discount whatever the government’s claim to implement by at least 200%. There would always be massive delays, cost overruns, project changes, a spate of litigations and steep learning curves. This is not to imply that the projects would not happen. Rather one should keep a track of all major government projects for future reference.
  2. Please be wary of the exaggerated marketing claims when they are too futuristic. Discount them by a minimum of 60% in such areas.
  3. Do not be in a rush to buy Real estate assets in upcoming and heavily marketed areas. A very viable strategy is to wait for the delays to happen and then go shopping. Be rest assured bargains would be found.
  4. Future is uncertain and that is why system produces “inefficiencies” which savvy investors can exploit to reap multi bagging returns.

What actions can be done now?

Best Houses in India

The following can be done to take advantage of the present situation.

  1. Find products which are ready to occupy in these areas to reduce delivery risk.
  2. Negotiate real hard with the sellers and get attractive valuations. Have just hinted at 02 offerings though with more diligent search even better opportunities can be found.
  3. Seek whatever rent, howsoever meager, to monetize the asset and improve general confidence in the area.
  4. Wait out, be patient and the tide will turn. When it does this investment can be the best call ever taken by you.

Though the above four will take a lot of courage and would be battle of self-confidence.

To conclude, feeling troubled that we have extremely unaccountable governments. That they don’t perform what they promise and they don’t compensate the citizens for their failures.