Developers Turn To Stalled Projects As Land, Construction Costs Rise

As land and construction become more expensive, developers are also looking at projects that have been stuck for years instead of always starting with a fresh land parcel.

Projects where construction has already started, and where land and key approvals are in place, can offer a head start over greenfield developments. Developers are exploring such opportunities through NCLT-led insolvency resolutions, settlements with existing stakeholders and arrangements with development authorities.

The model is also gaining attention because it can address two problems at the same time: developers get access to projects without starting entirely from scratch, while homebuyers stuck in delayed projects get a potential pathway to completion and possession.

Rising Construction Costs Make Stalled Projects Attractive

Construction costs increased by 34 per cent between 2021 and 2025, while housing prices rose 59 per cent, according to ANAROCK. The average cost of constructing a standard-plus residential project rose at a compound annual growth rate (CAGR) of 6.9 per cent during the period, from Rs 2,681 per sq ft to Rs 3,604 per sq ft.

ANAROCK said construction expenses accounted for about 66 per cent of the increase in residential prices, with the remaining 34 per cent attributed primarily to higher land costs, developer margins and changing demand-supply dynamics. During the same period, average residential capital values rose at a CAGR of about 12 per cent, from Rs 5,826 per sq ft in 2021 to Rs 9,260 per sq ft in 2025.

According to Rakesh Kumar Agrawal, CMD, AIGIN, and President, CREDAI Ghaziabad, project costs have risen not only because of land and construction expenses but also because of raw-material supply-chain disruptions, newer construction technologies, the need for skilled manpower and higher transportation costs.

This is prompting developers with the financial capacity to look for alternative ways of creating housing supply.

Lower Land Acquisition Costs

One of the key attractions of taking over an existing or stalled project is that the developer may not have to acquire land at current market prices. Instead, capital can be deployed towards settling the previous developer's liabilities, clearing dues to development authorities and financial institutions, addressing homebuyer claims and completing the remaining construction.

Industry experts say when a developer takes over a project through the NCLT process, it has to work within the approved resolution plan and meet the obligations that come with it. The project’s viability then depends on factors such as the pending dues, how much construction has already been completed, the status of approvals, demand in the area and the cost of completing the remaining work.

According to Geetanjali Khanna, MD & Founder, ReaRCo Pvt Ltd, projects acquired through insolvency proceedings can offer a combination of existing land, approvals and partially constructed towers. This means the new developer's initial financial commitments can be focused on settling applicable dues, completing construction and revalidating or renewing approvals where necessary.

With access to financing, including funding support through the SWAMIH Fund where eligible, construction can potentially restart faster than in a completely new project, she said.

Existing Construction Can Save Time

Another advantage is the work already completed at the site. Depending on the project, a new developer may take over structures that are 15 per cent to 50 per cent complete, and in some cases even further advanced.

This can reduce the amount of fresh expenditure required for work that has already been carried out. But existing structures cannot simply be taken over, and construction resumed. They need detailed technical, structural and safety assessments, followed by repairs, rectification or modification wherever required.

Lt. Col. Ashwani Nagpal (Retd.), COO, Diligent Builders, said an incomplete project presents both an opportunity and a challenge for a new developer.

“The NCLT resolution process provides a structured framework for taking over the project and addressing the claims of different stakeholders. Once the project is acquired, the developer has to implement the approved resolution plan, including addressing homebuyer claims and other outstanding obligations,” he said.

At the same time, existing structures need to be assessed to determine whether they meet current construction and safety requirements and what modifications may be necessary.

Balancing Land, Construction and Buyer Expectations

Developers may also examine whether previously sanctioned plans can be modified, subject to applicable regulations and approvals. In some cases, optimisation of permissible Floor Area Ratio (FAR) could allow changes to the project configuration or the number of units.

Shalender Sharma, Chairman, Renox Group, said balancing land and construction costs has become an important challenge for real estate companies. In this environment, acquiring and completing stalled projects can provide an alternative to launching an entirely new development.

However, simply adding more inventory may not be enough, he said. Developers also need to consider construction quality, design and amenities that match changing homebuyer expectations.

Benefits Extend Beyond Developers

For homebuyers, the revival of a stalled project can mean a chance to finally get possession after years of waiting.

Industry experts say a new developer can bring fresh funds and restart work at projects where construction had stopped. But taking over such a project does not guarantee a quick completion. The developer first has to assess the project's pending dues, approvals, legal issues and the condition of the existing construction.

There could also be scope to sell some of the unsold homes as construction restarts. “Developers may keep the initial pricing competitive to bring in sales and generate funds for the remaining work. The final price, however, will depend on the location, cost of construction and prevailing rates in the market,” industry experts say.

The impact extends beyond the project itself. Once construction resumes, demand returns for contractors, labourers, suppliers, consultants and other service providers. Sales, registrations, utility connections, maintenance and other related activities can also resume, supporting economic activity around the project.

According to Himanshu Garg, Director, RG Group, managing time and funds can be relatively easier when a project already has substantial tower structures in place compared with developing a project from the ground up.

Giving an example, he said RG Residency was revived through a "reverse insolvency" process, following which construction resumed, and the project subsequently received the Occupancy Certificate (OC) for around 1,900 units. He described it as an example of an incomplete project being brought back on track in the Noida-Greater Noida region.

Not Every Stalled Project Is A Viable Opportunity

For developers, however, stalled projects are not an easy substitute for greenfield development. The apparent advantage of existing land and construction has to be weighed against unresolved liabilities, homebuyer claims, legal disputes, approval issues and the cost of repairing or modifying old structures.

The attractiveness of such a project therefore, depends less on how old it is and more on what a new developer inherits - the quality of the land and approvals, the extent of construction completed, outstanding liabilities and the likely cost of bringing the project to market.

As land prices and construction costs remain elevated, these calculations are making stalled and incomplete projects worth a closer look. For the market, successful resolutions can also bring long-delayed homes back into the supply pipeline and give existing buyers a chance of finally getting possession.