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As Indian realty bounces back, there's another crisis looming

real estate | IST

As Indian realty bounces back, there's another crisis looming


Developers have begun staring at a new, but not entirely unexpected problem — an acute labour crisis.

If a story on comebacks had to be scripted this year, it would have Indian real estate as its hero. After months of little to no activity, home sales began hitting a fever pitch during the Unlock phase, especially in the run-up to the festive season. However, developers have begun staring at a new, but not entirely unexpected problem — an acute labour crisis.
At Casagrand's construction site near Chennai's Medavakkam suburb, there's an air of urgency, before COVID-19 hit, this builder was looking to close the year at over Rs 3,000 crore worth of residential sales. Given the lockdown, that number saw some downward revision. But Casagrand still hopes to end FY21 on a high.
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"By the end of the accounting year, we will be close to Rs 2,500 crore in sales, and that will put us on the pedestal of being the highest-earning builder in Chennai and among the top three builders in Bengaluru," said MN Arun, founder and managing director, Casagrand.
Arun isn’t alone. Most developers have set themselves big sales targets. But there is a problem. These builders can't sell what they don’t have, and the construction industry is massively dependent on migrant labour to build homes — labour that hasn’t returned since heading back home during the lockdown months. As a result, most real estate construction sites are operating at merely a fraction of their pre-COVID labour numbers.
Labour costs up 10 percent
For instance, Chennai-based developer Navin’s employed 300 migrant workers before the lockdown in March, at its Starwood Towers project site in Chennai. Today, only 50 of those workers have returned to work. "Less than 40 percent or 30 percent of migrant labour has returned, which means there is a pressure on labour. Local labour is more expensive than migrant labour," said R Kumar, chairman and managing director, Navin’s.
Navin’s has now begun hiking wages in the hope to incentivize on-site construction activity. It has also been left with little option but to hire local hands — a move that has pushed its labour costs to over 30 percent more than pre-COVID numbers. Kumar says that even if material prices stay the same, the January-March quarter of FY21 could see home prices jump by 10 percent to make up for increased labour costs.
Fear of COVID-19 not as great of that of unemployment
Even if local hands are employed and prices go up, there’s little assurance that ongoing residential real estate will be completed on time, thanks to the existing labour shortage. However, construction workers that have returned to work from states like Bihar, Jharkhand, Odisha and West Bengal say the fear of unemployment was more worrying than that of contracting COVID-19.
"We returned home, but asked ourselves how exactly we were going to earn money sitting idle," said Navin Bhatt, a Jharkhand-based construction worker in Chennai, "And how long do we sit idle at home anyway — One week, two weeks or three weeks?"
With the fear surrounding COVID-19 dissipating by the day, there’s every possibility that these construction sites will see better days when it comes to labour availability. And with several homes waiting to be built and delivered, construction labour could well become a developer’s most prized resource.
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