The other answers tell in great detail about the lack of facilities and infrastructure which causes people not to prefer new IITs. But, I don’t think that is the real reason.
The real reason is the last years’ opening and closing ranks. They pretty much decide what students will prefer. There are a few minor changes but most students follow what happened last year. Computer science is moving higher up in the rank in all IITs but for most other branches it repeats year after year.
If I had a choice between IIT <New> and IIT Bombay as a student, I would definitely choose IIT Bombay because of the higher reputation, which brings in good quality students and faculty. It is a self-reinforcing cycle. Next year, even better students and faculty come in.
I don’t think a lot of people would choose an institution of vastly lower reputation as compared to the higher reputation institution. Some people may choose a lower reputation institution as a job because you have to spend your whole life in a job, so the considerations are many more, but as a student, when you have to spend only 4 years of your life in a college, it is better to choose a college with a good standing.
You can ask the same question about anything: “Why don’t people choose to go the newest school in the town?” Reputation. It is all about the reputation.
After experiencing an old IIT, I would prefer the “worst” branch in an older IIT as compared to the “best” branch in a new IIT. It is an experience that newer IITs cannot reproduce, just yet. May be in the future.