Three Reasons Why COVID-19 Lock Down Relaxation Will Not Be Relaxing For The Real Estate Sector

As the real estate sector gears up to get back to work on Monday thanks to the easing of COVID-19 lockdown restrictions that have been in place since March 24, it is faced with more questions than answers.

Will the easing of lockdown restrictions get construction back on track? Do real estate projects have the required labour on site to resume construction? How will the new normal affect efficiency of construction work at these sites? For a start, developers are not basking under the illusion that any easing of restrictions will mean resumption of normal work at any construction site.

‘Only critical construction work can resume’

“We have realized there is not enough clarity with regard to how many labourers will be able to start work on April 20 as there has been labour that has moved out from the sites, while some others have been complaining about health issues not relating to COVID-19,” said Niranjan Hiranandani, President, NAREDCO. “Obviously, this labour won’t start work on April 20. But we continue to hope the restart happens across maximum number of sites.”

Given the uncertainty surrounding labour availability, NAREDCO says that most developers’ priority is to get a skeletal labour force on site, to finish critical construction work whose delay could damage a project’s existing construction.

“If this isn’t done, it could result in larger losses. Next, excavated basement spaces or piling drilled for creating foundation will have to be dealt with on an emergency basis before the Monsoon sets in,” said Hiranandani. “Only once these situations are dealt with, will sites will look at returning to ‘normal work’.”

Last week, the Ministry of Home Affairs issued a circular with guidelines on businesses returning to work on April 20, given the Centre’s plan to ease restrictions on the nationwide lockdown in force from March 24.

According to this plan, only project sites that fall outside containment zones would be allowed to resume construction work, provided labour for the site in question is available and not brought in from another location.

Location & labour the key to resumption

Some developers have found themselves on the right side of good fortune since their projects don’t fall within COVID-19 containment zones and have labour readily available.

“As we retained labor for all our ongoing projects, we will be able to start work on all these projects,” said Pradeep Aggarwal, Founder and Chairman of Gurugram-based Signature Global. “Extra work can be distributed among the existing labour by giving them proper compensation for it,” he says.

Not everyone, however, is as fortunate. “We have projects in containment zones and we are with the government in its attempt to arrest the spread of coronavirus,” said Prateek Mittal, Executive Director of the Chandigarh-based Sushma Group. “Obviously, it is a financial loss with each passing day as there is a fixed cost component attached to projects.”

Ever since the Home Ministry’s guidelines were released last week, there have been reports doing the rounds on how the easing of restrictions on construction, would have only limited impact.

Part of the reason for this limiting factor is that several high-profile real estate projects are located in regions like the Mumbai Metropolitan Region, for instance, which has as many as 721 containment zones.

This simply means no construction work can resume with or without availability of labour on site. “This is going to leave the projects in deep financial stress,” said Sagar Saxena, Project Head at Noida-based Spectrum Metro.

Could construction efficiency take a hit?

Irrespective of location or labour availability, the big limiting factor that the real estate business will have to contend with is the enforcement of social-distancing norms at construction sites. While the thought of frequent washing of hands or masons maintaining an arm’s length between them seems unthinkable at a project site, developers will be forced to implement these practices should their businesses be allowed to function.

“The expectation is that the pace will be slower than usual, and efficiency will need to be measured in terms of quality of work done, and not the quantity of work completed over a period of time,” said Hiranandani.

Quality or quantity notwithstanding, even as the real estate industry limps back to work on April 20, expect no rebounding or sunny days for the business as it becomes one of many sectors to acclimatise to life in the Post-COVID world.

(Source: CNBC TV18)