Jul 2020

COVID-19 Lockdown Relaxation: What Does It Mean For The Real Estate Sector?

By Amit Wadhwani, MD & Co Founder, SECCPL

The morning of 15th April 2020 brought with itself a breather when the Government announced the resumption of construction activities in non-hotspot regions, along with a host of guidelines to help developers run their projects with sheer efficacy and minimum health hazards. As per a report published by KPMG, projects worth more than INR 59 lakhs crores are under the process of development and unfortunately have faced the brunt of COVID-19. It further states, the sector employs over 49 million people, which is equivalent to 12% of the nation’s workforce and has a multiplier effect on over 250 allied segments. 

With such statistics and studies, one can easily understand the very essence of the construction sector in the Indian economy. For reviving India from the on-going financial slump, it is of great importance to bring back to life one of its premier industries. However, even the re-start button does not ensure complete normalcy and entails numerous rules and regulations. 

Some impacts of the lockdown relaxation are as follows- 

Positive Message

Numerous realty experts have suggested that the recommencement of construction activities will send a positive message across the board. It will be a sigh of relief for investors, developers, employees, and homebuyers. It is bound to ensure significant cash flows, especially for projects that are close to completion, and will further unlock investment potential. 

Level of activity 

It is assumed that construction projects with large investment scales will be the first to witness the resumption of activities. Sites that are close to completion will be paid great attention, as developers would desire to hand these projects over, simultaneously generating enhanced positive cash flow. Further, those projects that are backed by the government and entail the interest of the public are bound to note a kick start. Additionally, all efforts will be concentrating towards the completion of those projects that have a deadline of 2020. 

Limited workforce 

As per a recent study, migrant workers comprise at least 80 per cent share of the total 44 million workforce in the construction sector. However, the lockdown has caused a huge burden on these individuals. Several daily wagers are stuck in distant states and are unable to return home. Real estate experts are assuming that the morale of these workers is too low to allow efficient operations and at the same time once the lockdown is lifted they will be rushing home causing a shortage of labour in a labour-intensive industry. 

Availability of raw materials 

As per the new guidelines the transportation of goods, irrespective of the fact whether they are carrying essential or non-essential items, has been allowed. This has enabled the realty sector to acquire raw materials with sheer ease. It is said that a phased reopening of the economy will facilitate an upward trajectory of growth and will reduce the overall estimated loss of estimated loss of Rs 26,000 crore per day, faced by the Indian market. 

Focus on sanitisation 

In this new era of operations, contractors and developers have to maintain social distancing even when they are at work as well as adopt hygiene and safety measures. Companies will have to ensure regular sanitisation of the sites, providing labourers with masks, offering soap and hand sanitizers, followed by consistent screening.

Having evaluated how the relaxation looks for the real estate industry one cannot forget the fact that construction is a labour-intensive industry; different projects have diverse workforce requirements. For instance, if a project is in a structure stage, the number of labourers required at the site would be higher as compared to that which is on its last leg of construction. Further, the number of labours deployed at a residential site is way more than what is required for an industrial project as it is highly mechanised. Hence, even though the Government has hit the re-start button for this industry, developers and contractors need to take right precaution whilst carrying out these activities.

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Amit Wadhwani MD & Co Founder, SECCPL
Articles 3
Updated: 27 Jul 2020
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