Regulatory Delays
Several major real estate developers, including some of the industry’s top listed firms, are witnessing a slowdown in pre-sales bookings this fiscal year. The key reason? Delayed project approvals and regulatory hurdles, which have caused a significant dent in new project launches.
Impact on Key Real Estate Industrialists
Industry leaders such as Prestige Estates, Puravankara, Godrej Properties, DLF, and Macrotech are struggling with prolonged project clearance timelines in major real estate hubs like Mumbai, Pune, Bengaluru, Hyderabad, and Delhi-NCR. These bottlenecks have delayed the launch of high-value residential projects, leading to stagnation or marginal declines in pre-sales performance compared to the previous year.
A Temporary Setback
According to ICRA, the total area sold in India’s top seven cities is expected to decline by 2-4% in FY25, reaching 670-685 million square feet (msf). This contraction is primarily due to fewer project launches, which are estimated to decline by 10-12% YoY. However, a rebound is projected in FY26, with sales expected to grow by 9-11% due to sustained demand, lower inventory levels, and faster sales velocity.
Sales Performance of Major Developers
Prestige Estates Reports Significant Drop in Pre-Sales
Prestige Estates recorded a 38% decline in sales bookings, amounting to Rs 10,065.7 crore in the first nine months of FY25. The company attributed this drop to fewer new project launches, primarily due to regulatory delays. Despite this, Prestige Group’s Chairman and Managing Director, Irfan Razack, remains optimistic, stating that several high-value projects in prime locations are in the final stages of approval and will soon be launched.
Developers Struggle to Maintain Growth Amidst Challenges
- Puravankara posted pre-sales of Rs 1,265 crore for Q3 FY25, marking a modest 2% YoY growth.
- Godrej Properties reported Q3 pre-sales of Rs 5,450 crore, a 5% decline from last year.
- A leading Mumbai-based developer encountered approval-related setbacks for a luxury residential project in Bengaluru, delaying its market launch despite strong buyer interest.
The Regulatory Bottleneck Slowing Down the Market
A significant concern for developers is the lengthy project approval process, which can extend from 8-12 months and, in some cases, up to 18 months. While compliance with the Real Estate (Regulation and Development) Act (RERA) ensures transparency, it has also introduced layers of bureaucracy that slow project execution.
Additionally, stricter environmental regulations and land acquisition policies have further delayed the launch of premium residential and commercial projects, impacting overall market momentum.
Broader Market Implications
Declining Sales and Market Stagnation
Housing sales in Q4 2024 totaled 72,930 units, reflecting a 3% decline from the previous year. Mumbai, Pune, and Bengaluru accounted for 64% of these transactions. Despite a 3% YoY increase in new project launches in 2024, regulatory delays remain a significant hurdle to market expansion.
Investor Sentiment and Stock Market Volatility
Concerns over project pipeline delays have led to volatility in real estate stocks. Foreign institutional investors (FIIs), who were previously bullish on India’s real estate sector, are now reassessing their investments due to these ongoing challenges.
The Call for Regulatory Reforms
Industry leaders are advocating for regulatory reforms to streamline the approval process. Organizations like CREDAI are engaging with policymakers to implement a single-window clearance system, which could significantly reduce delays and restore confidence in the sector.
Although the real estate market’s fundamentals remain strong, faster approvals are necessary for sustained growth. Until these bottlenecks are resolved, developers will continue to grapple with delays, weaker pre-sales performance, and slower revenue expansion.
The message is clear—real estate developers need regulatory reforms just as much as they need buyers.