Air quality-driven construction ban may delay realty projects in Delhi-NCR

568,000 housing units are under various stages of completion. Periodic bans by NGT, govt, or apex court in response to poor air quality have serious consequences, say experts

The real estate market, which was just getting back on track with demand booming after a near two-year gap, is now facing a new setback with deteriorating air quality in Delhi-National Capital Region (NCR). The Commission for Air Quality Management (CAQM) has come up with a revised Graded Response Action Plan (GRAP) ‘stage 1’ and has banned construction and demolition activities in the region.

If the pollution reaches severe levels, authorities will enforce a complete ban on construction and demolition activities in NCR, except on essential projects such as railways, metros, airports, ISBTs, national security/defence-related projects of national importance.

According to an Anarock research, more than 400,000 units are currently under various stages of construction in Delhi NCR, such as Greater Noida West, Yamuna Expressway, New Gurgaon, Noida Expressway, Dwarka Expressway, Central Noida, Greater Faridabad, Raj Nagar Ext. (Ghaziabad), Sohna and Golf Course Ext Road.

“There are currently as many as 568,000 housing units under various stages of construction in Delhi-NCR. Periodic construction bans by the National Green Tribunal, the government, or the apex court in response to poor air quality have serious consequences,” said Prashant Thakur, senior director, and head–research, Anarock Group.

Thakur added that NCR has historically been seen as a market beset by heavy project delays and the most number of entirely stalled projects in the country. In recent times, the region has been able to erase much of this historical baggage, with developers becoming sharply focused on timely completion of projects.

According to industry experts, the emergency measures might help in controlling deteriorating air quality, but the economics behind this move may not inspire confidence in the realty sector.

V P Lobo, managing partner, Reboot Realty feels that with the cost of construction constantly rising, the immediate impact will be on the cost of production.

“Finance costs will continue to be incurred in the absence of sales and construction. But the most worrying part for the lender will be the ability of the developer to service the debt in this extraordinary situation,” Lobo said.

Asserting that the contribution of construction and development activities towards air pollution within the region is not major, Niranjan Hiranandani, vice chairman, Naredco, said, “Imposing a ban on construction sites will delay the project deliverables and cause cost escalation risk for the developers.”

Pradeep Aggarwal, Founder & Chairman, Signature Global, said, “We hope the government will provide some flexibility in the RERA deadlines accordingly if this ban continues beyond a month.”  

He added that the projects are time-bound under RERA guidelines, which requires developers to adhere to the deadlines prescribed by the regulatory authority. "We shall adhere to the directives issued by the Commission for Air Quality Management in the interest of the environment and wait till it lifts the ban." he said.

In response to the pollution-led ban on construction activities, Santosh Agarwal, CFO and Executive Director, Alpha Corp, said, "With no construction activity for most of the past two years--due to pollution ban and then due to lockdown--developers are staring at consistent delays in delivering projects. The Commission of Air Quality Management and the government should look for a midway to handle the rising air pollution levels."

Pollution levels in Delhi-NCR are at their peak during the winter months, and heavy smog engulfs the entire region. Various construction projects, including residential projects, get impacted in most parts of Delhi-NCR when a construction ban is imposed to battle air pollution.