The number of new housing projects launched in the top eight cities of India fell by 41 percent to 103,570 units in 2017, as against 175,822 units in 2016, according to a report by property consultant Knight Frank.
While in office and commercial sector, new completions are at a decadent low at 71 per cent for developers are diverting resources towards completing residential projects.
The report said industry experts felt measures such as the RERA and the Pradhan Mantri Awas Yojana that were expected to boost sentiments of the home-buyer were yet to make any significant impact on the buyer who had little incentive to buy. In the first half of 2016, the market had registered a 4% year-on-year drop in quoted prices over 2015. In the NCR, it dropped 11 per cent to 1,66,831 units. But from the sales peak of 2011 when 3,68,568 units were sold, this is a step decline of 62 per cent in 2017 at 2,28,072 units.
"Bogged down by the ongoing slowdown in the country in addition to its own issues ranging from political uncertainty, building collapses (due to flouting development norms), to the near catastrophic floods, the Chennai residential market had been in a downward spiral over the past three years", says the report.
"By the end of 2017, the residential sector had shrunk to a fraction of its size in less than a decade". The Chennai residential market, as of now, holds inventory to sell over the next 18 months. "Pricing is the first reason, RERA has given the buyers that confidence and this trend has been seen in the last six months". "From an annual perspective 2017 saw 32% fewer launches YoY and new projects and same was down by staggering 83% from peak in 2010", as per the report.
The RERA came into force from May 2017, while the GST was launched in July a year ago.
Homebuyers have a narrow window of opportunity though, because the West Bengal Housing Industry Regulation Bill (HIRA) 2017, already passed by the State Assembly previous year, is expected to be notified soon. It is also for the first time that prices have dropped by 7 per cent with an effective price difference added with discounts which add another 12 to 13 per cent. Flats are effectively being offered at a discount of 11-12 percent on the original price.
Meanwhile, Chennai city's office space market also plummeted as the share of largest office space consumer, IT and ITeS sectors, halved from 43 percent in second half of 2016 to 25 percent in second half of 2017. Sales, however, are up 5% annually, and with demand going up, a price hike may not be far behind.