A recent spike in construction materials have contributed to a more than 10% increase in construction cost
The second wave of the Coronavirus pandemic has been more devastating for the real estate sector than the first wave with almost 95 per cent of developers fearing project delays due to labour shortage and approval delays.
According to a report by CREDAI (Confederation of Real Estate Developers' Associations of India) based on a survey covering 4,813 developers across 217 cities, labour shortage, financial constraints, approval delays, increased construction costs, and weakening customer demand are key challenges facing the real estate sector.
According to the survey report, the developers feel inevitable project delays if no urgent relief measures are injected into the sector by the government and RBI. These delays are attributed to a range of factors, with 92 per cent of developers experiencing labor shortage at sites, 83 per cent of developers are working with less than half the workforce, and over 82 per cent of developers are facing project approval delays.
Harsh Vardhan Patodia, President, CREDAI National, said the real estate sector showed tremendous resilience in bouncing back on a cautious recovery path post the first wave, despite little relief measures. However, the second wave has prompted CREDAI to reflect and re-evaluate the growth path of the industry, and assess the challenges faced by the customers and industry partners in light of the recent developments.
“The findings reveal that the second wave has had a more debilitating impact on the real estate sector than the first wave,” he said.
Added factors such as a recent spike in construction materials including steel and cement have contributed to a more than 10 per cent increase in construction cost for more than 88 per cent of developers, the report said. “Various financial constraints and liquidity crunch are further adding to the problem, with 77 per cent developers experiencing issues in servicing of existing loans, 85 per cent developers facing disruptions in the planned collection, and 69 per cent is facing issues in the disbursement of customer home loans,” it added.
The survey findings by the apex body of real estate developers also put a spotlight on changing consumer behaviour, resulting in a slowing of demand due to a decrease in enquiries and site visits. A staggering 98 per cent of developers are facing reduced customer enquiries and 42 per cent developers are experiencing a 75 per cent decline in customer enquiries. Furthermore, the report reveals that the second wave has caused 95 per cent of customers to postpone their purchase decisions.
“We have made a representation to the government citing the current survey and requesting the government to infuse urgent financial stimulus and initiate quick progressive measures to assist recovery. As a part of our presentations, we have requested for liquidity infusion, one-time restructuring of loans, across the board 6 months extension of completion date by RERA, stamp duty reduction or waiver, moratorium extension on principal and interest for six months, and freezing of SMA classification for another year,” Patodia added.
The apex developers’ body also feels that reducing the cost of construction materials, implementing single-window clearances for project approvals and work commencement, and allowing an input tax credit for all sectors will help the business.