Offering some relief to the construction sector, the government on April 15 relaxed guidelines for lockdown 2.0 permitting some construction activity in the non-COVID-19 hotspots starting April 20. However, this is only provided strict social distancing guidelines are followed and construction workers are locally available on the site.
Real estate experts said the resumption of construction activity from April 20 onwards, would send out a positive message to both investors, occupiers and homebuyers. It would ensure healthy cashflows at least for projects that are close to completion and unlock further investment potential.
Also, it is the well-funded projects that are likely to see immediate construction activity after lockdown is lifted. Developers will first look to start with projects that are already nearing completion to generate positive cashflows. Public infrastructure projects are also likely to take off first.
According to KPMG, total construction projects worth more than Rs 59 lakh crore are under development, most of which would have been impacted severely by COVID-19. The Indian construction sector employs over 49 million people, close to 12 percent of the nation’s working population. Further, it has a multiplier effect on nearly 250 allied industries.
“Considering the ongoing scenario, the move to start at least some of the construction activity on project sites, even with a limited workforce, is certainly welcome. That said, since many migrant workers had left for their villages post lockdown 1.0 announcement, we will have to wait and see how many are actually left back to resume work. Migrant workers comprise at least 80 percent share of the total 44 million workforce in the construction sector currently,” said Anuj Puri, Chairman – ANAROCK Property Consultants.
As far as construction activity in non-hotspots is concerned, developers will need to focus on resuming construction on projects that are already nearing completion and have a completion deadline within 2020.
Chairman and MD, Hiranandani Group and National President – NAREDCO said, “The real estate industry acknowledges the positive impact this will have in handling the migrant crisis and avoiding an economic crisis. Allowing phase-wise reopening of economic activity with precautions being adhered to is the right step to refuel the economic growth trajectory of the country. With this economic activity will be resumed. Considering the estimated loss of Rs 26,000 crore per day to the Indian economy as a result of the lockdown, this relaxation of lifting the lockdown is a constructive step.”
Under the new guidelines, transportation of goods without any distinction of essential or non-essential has also been allowed. This means that developers can procure raw material to restart work.
After the lockdown, there would be immediate traction from existing buyers. “Even a conditional and limited resumption of construction work would provide some reprieve, help eradicate a further six-month delay and ensure that losses are reduced by 30 to 40 percent,” said Pankaj Forais, Founder and Managing Director, Liases Foras.
How do you maintain social distancing in the real estate sector?
Under the fresh guidelines, contractors along with developers will need to ensure that social distancing is maintained at the sites and will need to find ways and means of achieving it. For basic hygiene and safety precautions, companies can regularly sanitize sites and provide labourers with masks, soap and sanitizers for washing hands frequently.
This surely will change the rules of the real estate sector. The focus of developments going forward, assuming construction activity will be allowed to resume, would be on three ‘S’- screening, sanitation and sanitization of labourers, labour camps and construction sites.
“A graded approach is the key to the success of enforcing discipline across construction sites. As the workforce gets ramped up on construction sites the full rigours of screening, infrastructure and protocols will be available to manage the pace of developments,” explained Indranil Basu, Director, Project Management, (South India) Colliers International.
The number of labourers that need to be employed at the project site will have to be assessed basis the stage of construction the project is in and the category of the project.
“A graded approach is not about starting construction at breakneck speed. Planning will hold the key. Plan your work priorities, enforce proper work environment and infrastructure, screening and sanitation measures, and augment workforce with the focus on critical activities,” he said.
Real estate projects would have to be assessed based on the stage of construction that they are currently in, and also on the asset class of the project. “The approach for restarting a commercial project would vary from that of a residential or an industrial project. The number of labourers deployed at a residential project site is generally more than the number deployed in an industrial development where the focus is more on mechanization,” he said.
Also, if a project is in a structure stage, the number of labourers required at the site would be much more. Therefore, the developer would have to focus more on screening them at regular intervals. However, if the project has moved beyond the structure stage, there is every possibility of less workforce and more skilled labour to be employed.
It should be remembered that the Department of Promotion of Industry and Internal Trade had earlier suggested to the Ministry of Home Affairs in a letter that “housing and construction sectors need to be allowed if the labourers stay at the sites with all facilities and safeguards, contractors shall ensure safety sanitation and distancing norms.”
“It is felt that certain more activities with reasonable safeguards should be allowed once a final decision regarding extension and nature of lockdown is taken by the Central government,” it had said.
The Uttar Pradesh government has also decided to resume construction work on government projects from April 15 provided social distancing norms are followed at the sites.
What does it mean for the real estate sector?
Real estate developers pointed out that some work could actually restart from April 20 keeping social distancing norms in place as most sites do have material that would last about 10 to 15 days.
“This may be a good move because the workers that are currently on-site and have not returned to their villages will be occupied, projects that are ready for possession can be handed over and things can move forward. One will have to ensure sanitation and social distancing measures at all times,” said Satish Magar, President, CREDAI, National.
Amit Modi, CREDAI, Western UP, president (elect), said that to resume construction work, the entire supply chain needs to be revived. “You need all processes and the team comprising workers, engineers, architects in place to restart work. A developer would also have to assess the condition of the material left on site before he decides to resume work.”
Credai is planning to come out with a social distancing manual in the next eight to 10 days.
How will project rules change?
All real estate companies would have to enforce social distancing norms going forward.
Colliers International India is in the process of putting together a white paper on how real estate stakeholders should implement social distancing norms on construction sites.
“This will bring about a shift in how we go about doing real estate business in India,” said Basu.
“Screening would have to be increased on construction sites, in buffer zones, in labour camps and even construction premises. Disinfection would have to be carried out in compliance with WHO guidelines. Labour welfare strategies would hold the key. The need will be to enforce a zero-tolerance policy to implement this. We will advocate the need to deploy safety marshalls to conduct these measures in a disciplined and process-driven manner,” he said.
For very large projects, clients will benefit by deputing ambulances on construction sites; there would be regular visits by doctors in labour sites. Being prepared is important and measures as these will ensure that works do not get stopped.
“This is important when you are opening up construction sites in a graded manner,” he said.
Some consultancy firms have also advocated that developers increase focus on mechanization and rely on pre-engineered products and solutions.
Projects near financial closure, infrastructure projects may see traction
There are two types of projects – government and private where construction activity came to a grinding halt post the lockdown. Most projects – infrastructure or residential – which already has financial closure would see traction first. This is important to boost the confidence of homebuyers and investors.
“Projects that were nearing closure will continue. Both infrastructure and industrial projects will move ahead – those fundamentals will not change. This abrupt stop will not alter the dynamics of these projects. That’s what the UP government has done by announcing that construction work on government projects would continue after May 15,” said a real estate expert.
Samantak Das, Chief Economist and Head of Research in JLL is of the opinion that de-densification should be the key for all construction sites going forward.
Also, since private investments may take time to resume, the government should focus on spending on infrastructure activity to generate employment and keep the economy afloat.
“It should pump in money for public projects such as roads, highways, metro and even affordable housing but implement social distancing norms along the way. That will hold the key,” he said.
(Source: Moneycontrol)
