Capital value of residential properties to rise post RERA: JLL-CII report
Slowdown in new home launches due to implementation of RERA and reduction in inventory will lead to an increase in capital value of residential properties, says JLL-CII report
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Mumbai: Slowdown in new home launches due to the implementation of new real estate regulations and reduction in unsold inventory would lead to a steep rise in capital values of residential properties across all cities in the short term, property consultant firm JLL India said.
As per the report, ‘2017: The Inflection Point of Indian Real Estate’, by industry body Confederation of Indian Industry (CII), and JLL, new launches across major cities have declined since 2014.
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In the first quarter of calendar year 2017, nearly 30,000 housing units were launched in the top seven cities including Mumbai, Delhi-National Capital Region (NCR), Bengaluru and Chennai as against 70,000 units in 2014.
“Overall capital values are likely to go up across most cities as there will be slowdown in supply, while demand will remain robust,” said the report.
The Real Estate Regulatory Act (RERA) which was officially implemented on 1 May, has forced developers to focus on completing ongoing projects as any delay in delivery would attract heavy penalties.
Initially, the rise in capital values of residential properties will be a reflection of reduced supply as only those developers confident of completing projects in a timely manner will undertake new ones, the report said.
“Later, as the market becomes more transparent and well-regulated, end-users and investors will find their way back, keep capital values up,” it added.
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The report also pointed out that the slowdown in the information technology (IT) and IT-enabled sector is likely to have an impact on the real estate market, particularly in Bengaluru.
“If this bracket of consumers faces a serious rush of getting pink slips, there is a possibility that the recovery of the residential sector in the mid-premium category will be delayed,” it said.
Residential markets were hit by the demonetization drive with a slowdown in sales in the first quarter of 2017, though it rose by 11.8% compared to the previous quarter, according to the report. Over 30,000 housing units were sold in the first three months of the year.
In the quarter ended March 30, over 30,000 housing units were sold.
“Developers have already started aligning businesses to RERA guidelines and brokers will need to follow suit, else both are likely to fall by the wayside,” said Ramesh Nair, chief executive of JLL India.
A marginal dip in residential supply is forecast in the near term, as developers capable of delivering on time will undertake new assets, Nair said.