The Real Estate (Regulation and Development) Act (RERA) has dented the realty market in Ahmedabad significantly with the city staring at the grim possibility of a staggering 80% fall in new housing projects in this calendar year. Apart from that, RERA has already claimed a major casualty – the Ahmedabad Municipal Corporation’s (AMC) ambitious Sabarmati Riverfront commercial development project. The corporation was hoping to garner about R6,000 crore by auctioning 12.5 million square feet land of the riverfront for commercial purposes under the development project. However, the auction held in June was a complete washout with no developer coming forward to bid for the project on account of unfavourable market conditions and the prevailing high price of the land. AMC had quoted about Rs 7.5 lakh per square metre price for the land. “The market is presently not good. For the developers, it requires huge investments. Further, even after development, there is a question mark over the commercial viability of the property at riverfront location because of the high valuation and the lack of clarity over the impact of RERA,” said Sharif Memon, past president of CREDAI Gujarat. AMC had invited online bidding of two plots of Sabarmati riverfront in June but looking into the uncertainty of realty market and less interest of developers, the corporation had postponed the e-auction. A top official of Sabarmati Riverfront Development Corporation (SRFDCL) said, “GST and RERA rules have forced developers to take a back seat till the market stabilises and therefore the auction was postponed.”
Commenting on the impact of the new Act on the sector as a whole, market observers said the rules and regulations of the Act will increase the time of registration and approval of any projects from current nine months to over a year. In addition, though RERA has been officially implemented , the state government is still not ready with the It infrastructure to facilitate its glitch-free implementation. As the IT infrastructure is yet not ready with the state government, no new projects have been floated during May and June. Only ongoing projects will be registered in RERA.
“Average launch of the projects has come down in last two quarters to 4 – 5 projects a month in the year 2017 as against 8-12 projects in a month in corresponding period in 2016. Demonetisation, GST and lately RERA have affected the new launching of real estate projects in the city,” said Nirav Kothari, national president Jones Lang LaSalle Property Consultants (India) Pvt Ltd.
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Corroborating the slump in the realty sector, data released by independent global property consultancy firm Knight Frank (India) Private Limited in Ahmedabad today reveals that during first half of the 2017, numbers of new projects launches have decreased by 79% to 1,874 units as against 8,809 units in corresponding period of 2016.
Sales picked up in H1 2017 from H2 2016, though it is still lower by 7% than H1 2016. This was possible due to availability of ready-to-move-in homes as developers rushed to complete unfinished projects before RERA came into force from May 1, 2017.
“The decline in new launches in Ahmedabad can be attributed to lack of clarity, especially on RERA, which has been the single most important factor that has held back developers from launching new projects. We expect launches to pick up once there is clarity on RERA and systems are put in place for its implementation.,” said Balbirsingh Khalsa, national director of Knight Frank. According to the consultancy there are about 32,900 unsold properties in Ahmedabad at this time. After RERA several builders have offered discounts to clear their inventory. According to the developers, the industry will see RERA impact in this year as stake holders have to understand each and every clause of the act. Due to complexity of RERA real estate players may not take a risk to announce new schemes.
“Currently, launching of new projects has come to a grinding halt in the city and we are expecting that as compared to last year number of projects may decline by 80% in this year due to RERA. Many developers are not fully aware about regulations of the new act and have even aborted several planned projects for the time being,” said Ashish Patel, president of Gujarat Institute of Housing and Estate Developers (GIHED).