Impact of Election 2014: Realty sector struggles with labor shortages
Dec 14, 2013
Source : The Economic Times

 

BANGALORE/MUMBAI: The general election of 2014 is expected to exacerbate the labour shortage in the housing sector, putting more stress on builders and delaying further the delivery of nearly 1 million homes across the country, as lakhs of workers head back to villages and towns to exercise their franchise.

Tens of thousands of rural folk, especially from Uttar Pradesh, Bihar, Madhya Pradesh, Chhattisgarh and more recently from West Bengal, come and work in India's boom towns, where homes are being constructed for the middle class and rich. But they go back to their villages during elections, either to vote or for the largesse distributed by political parties.

Elections for a new government at the Centre will be held between March and May next year.

"The situation is grim. The state elections have already impacted construction cycles and we expect that during the coming general elections. The election fervour is so high this time, especially in Bihar, MP and UP, we expect larger numbers to go back to cast their votes," says Lalit Kumar Jain, chairman of the Confederation of Real Estate Developers Association of India (Credai), whose company Kumar Urban is building nearly 5,400 apartments in and around Pune. "There would be about 25% shortage of labour, which is critical."

Projects are already delayed, says RK Arora, managing director of Noida-based Supertech, which is building 40,000 homes in NCR. "A labour vacuum during the upcoming elections will only worsen the situation, both for us and the buyers."

While the impact would only be for a month or two, the situation is grim also because of a slowdown in the real estate sector and a large number of projects across the country already running behind schedule.

According to property research firm PropEquity, nearly half of the 9,30,000 under-construction residential units are likely to be delayed by up to 18 months. The real estate sector employs close to 1 crore people, most of whom are not on companies' payrolls.

Most of the workers employed by the real estate sector are not on company payrolls.

The real estate industry is already facing labour shortage of about 40% because of various reasons and this is likely to go up to over 60% by the end of the decade. For one, the government's MNREGA programme has pushed a lot of workers back to their villages as they can now get work closer home and wages too are decent.

The development of states such as Bihar is a factor already. Migration from the state, which made for over 50% of the labour employed in the real estate sector, has come down by a third in recent years, thanks to increased expenditure by the state government. This has pushed up labour costs in cities by 35-50% and many developers are struggling to find labour to finish projects on time.

A research by the Bihar Institute of Economic Studies shows that migration of labour from Bihar in the past few years is down 25-30%, and instead of moving to cities families are finding jobs in Bihar, either in state government projects or in NREGA schemes.

According to Credai, there is a shortage of 10 million workers in the construction sector as of date.

"Elections, both state and Lok Sabha, see unusually high movement of workers back to their home towns and it is a bit more accentuated in the metros. Work just stops, but it is not for long," says economist Bibek Debroy. The industry is already gearing up. A Tata Housing spokesperson says the company anticipates labour shortage around the elections and is speeding up construction to meet its construction milestones.

"We have started to speed up work to cover up any gaps that we may see next year due to large number of workers giving work here a miss for their election visits back home," says Sandeep Sharma, who supplies labour to builders in Mumbai.

Construction of 1 million sq ft of space requires 1,000 workers, and according to research firm Liases Foras approximately 1 billion sq ft of space is being constructed in the residential segment.

"Shortage of workforce has been identified as one of the prime factors leading to project delays and construction overloads, an essential element to revive sentiment of buyers and investors," says Sachin Sandhir, managing director, south Asia, at Royal Institution of Chartered Surveyors.

 

 

 

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