Despite a vibrant property market, residential and commercial real estate projects in Gujarat witnessed a slowdown in new launches during the 2023-24 financial year. According to the Gujarat Real Estate Regulatory Authority (GujRERA), the state recorded 1,721 new project registrations, marking a 7.7% decline from 1,866 in the previous fiscal year. This trend was evident across all categories, including residential, commercial, mixed schemes, and plotting schemes, in key markets such as Ahmedabad, Vadodara and Rajkot.
Vadodara and Rajkot saw the steepest decline in the launch of residential projects in FY 2024, according to GujRERA. The decrease in new projects was primarily driven by fewer launches in the residential and mixed (residential-cum-commercial) projects categories.
A top official of GujRERA said, “Many projects were launched in the state after the Covid-19 years, and most of them are under construction. Due to limited funds, several builders work on only one project at a time. This could be a reason for fewer number of new projects in the last financial year. The land cost has increased drastically, and it has also affected new launches.”
A leading developer said, “In Ahmedabad and Gujarat, housing prices have increased by 8-10% annually. On the other hand, land prices have increased more than 20% depending on the location. Also, construction and labour costs have increased significantly. Against this, prices of finished products (constructed property) have not increased accordingly, so the profit margins have reduced significantly. This has led to a decline in new launches.” Developers also believe that incomplete projects are one of the reasons. In fact, with govt granting permissions for a higher floor space index (FSI), the number of storeys in new residential and commercial buildings has also gone up, resulting in a higher number of houses in the same space.
Dipak Patel, president of Credai Gujarat, said, “The retail segment has seen a reduction in demand due to increasing interest in online shopping. However, demand for office space has seen a revival. Many applications are pending approval due to some technical issues in GujRERA’s new portal, and they will be registered soon. Due to increased FSI, the project size has increased, so the number of units in these projects has increased. There is no impact on actual supply compared to previous years.”
A real estate consultant said, “The real estate market is now mainly driven by end users. After Covid-19, investors returned to the market but shifted to stock market and gold because all asset classes are performing well. Liquidity has become an issue, and project launching is now costlier than before.”
In Vadodara, one reason for the drop in new schemes is the lack of land. “Many town planning schemes are awaiting permission, and hence, there isn’t enough land available around the city. So real estate groups are not coming up with new schemes,” said Vipul Thakkar, former president of Credai, Gujarat.
“Some buyers usually divert money from the stock market to real estate by buying properties. But with the stock market booming, most investors are not encashing stocks. As a result, there is a slowdown in demand for properties, and it has indirectly affected new launches,” Thakkar added.
Paresh Gajera, president of the Rajkot Builders Association (RBA), said there has been a decline in new projects across residential and commercial sectors in Rajkot post-Navratri. “There are affordable housing and premium projects, but those for the middle segment, priced between Rs 60 lakh and Rs 1 crore, are not being launched due to low demand,” he said.
He added that oversupply is a pressing concern in the commercial domain, with postCovid projects surpassing demand. Consequently, unsold inventory prevails, dissuading developers from venturing into new commercial projects.
With inputs from Nimesh Khakhariya in Rajkot and Tushar Tere in Vadodara.
Rise in redevelopment projects
Experts believe that Ahmedabad has seen an increase in redevelopment deals in the past two years, affecting the demand for projects on the city’s outskirts. Kartik Soni, director of Swara Group, which is involved in a number of redevelopment projects, said, “Areas like Navrangpura, Naranpura, Paldi, Vasna and Memnagar have seen many old societies going for redevelopment, and the number of houses in these societies has mostly doubled. Earlier, residents of older societies would buy new apartments on the outskirts mainly for a new house, amenities and parking, but they get all this now through redevelopment.”
Outlook positive for real estate
The real estate fraternity said many projects are at the registration level, and new launches will be seen in the upcoming festival season. Jay Deliwala, director of Kunvarji Realty Advisors, said, “Gujarat is witnessing faster infrastructure development and the state offers better employment opportunities, so there will be strong demand for housing. We believe there will be an interest rate cut with lower inflation, boosting affordable housing demand. Residential and commercial segments will see increased activities in coming years.”
Decrease in affordable housing projects
The affordable housing segment, a significant part of Gujarat’s real estate market, experienced a considerable drop in new launches. GujRERA data shows that only 443 affordable housing projects were launched in the state in FY 2024, down from 578 in the previous financial year. Ahmedabad saw registrations for new affordable housing fall from 201 to 149 during the same period.
Chitrak Shah, chairman of Credai Ahmedabad, said, “There are many projects under construction. New projects will come after completion of the cycle. Also, people have higher purchasing power, and there is a shift towards midand premium-segment houses after Covid-19. People want bigger homes with better amenities.”
A developer said they have no incentive to launch affordable housing projects as the Centre has not extended Section 80(IB), which used to provide tax benefits to developers for affordable housing.
