BENGALURU: New regulations in the real estate sector such as the Real Estate Regulation Act (RERA) and demonetisation have shrunk the residential market in Bengaluru by 25 per cent in the last two-three years, a new report states.
It, however, adds the residential market is set to head north this year.A joint report by Federation of Indian Chamber of Commerce and Industry and leading tax and advisory firm Grant Thornton on ‘RERA: How you are gearing up for compliance’ was made public on February 20.
The Bengaluru residential market grew consistently with the IT and ITes sector since 2011 causing an increase in population and a subsequent surge in demand for residential projects in the city, it says. However, demonetisation and RERA have caused a 25 per cent shrinkage in the market. “While these brought down the average number of new launches by 22 per cent, unsold inventory increased by over 10 per cent,” it says. Completed residential projects, which are not yet sold, form one of the components in such inventory.
The Grant Thornton Research unit points out that the number of new residential project launches touched a high of 33,000 units in 2015. It came down to 25,000 units in 2016, 20,000 projects in 2017 but is picking up momentum in 2018.Except in the case of a few micro markets (peripheral areas of city), the land values across most micro markets witnessed a 8 to 10 per cent decline.
The report ends on a positive note for this year stating the Karnataka RERA reforms would bode well for the residential market. “Goods and Services Tax credit will set the stage for overall recovery as markets have bottomed already and can only move north,” it states.A majority of the developers were keen on taking up affordable housing projects which would make this segment big in 2018, according to the report.
S Suresh Hari, vice-president of the Bengaluru Chapter of Confederation of the Real Estate Developers Association of India (CREDAI) said, “Due to RERA, many builders were holding back the launch of new projects. Many were waiting for the formalities to be completed. Meanwhile, buyers were also hoping that prices would come down due to the RERA and were delaying investing in houses.”The real estate sector will pick up this year due to incentives provided in the Union budget. Additional incentives and reforms are expected in the coming months, he added.