With Karnataka becoming the second state after Maharashtra to notify the Real Estate regulation and Development (RERA) Act, Bengaluru’s real estate market is expected to remain subdued in 2017 and is expected to recover only next year.
A report by JP Morgan has stated that while new launches will continue to remain low in the market through 2017, residential market recovery is expected to start from 2018 onwards. The report said that developers will focus on finishing ongoing projects this year and postpone all new projects to 2018.
The report stated, “RERA is deflationary on new launches as all existing projects have been brought under its ambit. Developers’ focus hence has shifted to completing ongoing projects rather than launching new ones”.
Echoing a similar sentiment, Suresh Hari, secretary, Confederation of Real Estate Developers’ Associations of India (CREDAI), Karnataka chapter, said, “We can see the real impact of RERA in next six months. The market condition will be better during 2018”.
The report by JP Morgan also said that real estate industry is staring at consolidation.
Over time, there will be not more than 15-20 developers in the city. It said, “We also believe that the Bengaluru property market will be in for a major consolidation as many erstwhile land owners will henceforth choose to remain just land owners rather than venture out and become developers.”
Ashish R Puravankara, managing director, Puravankara, said, “Market buoyancy can be envisaged in the real estate prices post RERA implementation. With RERA’s stipulated compliances and regulations, the project launches may occur with lesser frequency than before. With new launches getting spaced out the appetite for existing inventories will go up but will also eventually dwindle. RERA act may impede the smaller unorganised players, as adherence to the rules may be arduous. Also, it could lead to a consolidation of the industry, with larger players having a significant share of the market.”
Om Ahuja, chief executive officer, residential projects at Brigade Enterprises, said, “RERA will create shortage in market. Because post RERA, pre-launches will not happen. Developers can now launch a project only after all approvals. So the concept of pre-launch will vanish. So there will be shortage of supply of inventories and consequently we will see a revival of price in the market”.
Agreeing to JP Morgan estimates that unsold inventories in Bengaluru has come down by 12%, developers said not many launches have taken place during last 2-3 years.