Second wave shadow over real sector

Developers fear project delays due to labour shortage, financial constraints, increased construction costs, says Credai study

Hyderabad: Over 95 per cent of developers in India look at 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, which include labour shortage at sites, project approval delays and other challenges.

The Confederation of Real Estate Developers’ Associations of India (Credai) in its first-ever industry survey conducted across North, East, West and South zones between May 24 and June 3, to assess the impact of the second wave of Covid-19 on the real estate sector, found that the developers are experiencing the stress.

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Conducted with a stratified sampling method, the survey saw the participation of 4,813 developers from 217 cities across India, providing insights on the industry sentiment and the range of challenges faced by the sector.

According to Harsh Vardhan Patodia, president, Credai National, “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 us to reflect and re-evaluate the growth path of the industry, and we felt it was vital to 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.”

Added factors such as the recent spike in construction materials including steel, cement, etc., have contributed to a more than 10 per cent increase in construction cost for more than 88 per cent of developers. Various financial constraints and liquidity crunch are further adding to the problem, with 77 per cent of developers experiencing issues in servicing of existing loans and 85 per cent of developers facing disruptions in the planned collection.

The survey findings also put a spotlight on changing consumer behaviour, resulting in 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 of 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.

Recovery measures

“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 six-month extension of completion date by RERA, stamp duty reduction or waiver, moratorium extension on principal & 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.

Credai believes that continued and adequate policy support is critical for the revival of the Indian economy, as the real estate sector accounts for 6-7 per cent of GDP, the second-largest employer, and is a business generator for over 270 ancillary industries in the country.

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