Owners of properties razed for redevelopment are in a fix as Covid-19 has brought such projects to a standstill. While owners of these properties need to shell out on rent several more months, their dream homes could be a pipe dream since several developers are unlikely to complete their projects within the promised deadline.
About 70% of housing projects comprising apartment units in the Chennai Metropolitan Area are joint development ventures between owners and developers. Agreements are on a 40:60 ratio, with 40% of flats going to the owner and the developer selling the rest. In upmarket locations, land owners are offered up to 80% of the units constructed. In some cases, builders pay rental bills till apartments are handed over to owners. Joint ventures are risk-free for developers as no investment is made to buy land.
Now, with most such projects halted due to reasons including shortage of labour, land owners are in a soup.
B Kannan, who owns an apartment in a six-unit building at Palavakkam, entered into an agreement before the lockdown began with a developer to redevelop the property. Five owners shifted to rented houses. “But, Coronavirus has made the project non-starter as even demolition has not commenced. The owners comprising senior citizens and salaried couples are struggling because they need to pay rent for additional months amid the Covid-19 crisis costing jobs and salary cuts,” he said.
Redevelopment projects have run into rough weather in the past too with six landlords approaching the Tamil Nadu Real Estate Regulatory Authority seeking relief.
Now, Association of Builders for Chennai Development founder president A Balasubramani says, developers with multiple joint venture projects are the worst hit. “Those having single project will attempt to finish it. Landlords and developers should come to the negotiating table since the situation is unprecedented.”