'Labour migration down'

There is a severe shortage of about 40 per cent skilled construction workers as government projects like the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and the National Rural Employment Guarantee Scheme (NREGS) are encouraging migrant labourers from Uttar Pradesh, Bihar, Madhya Pradesh and Rajasthan to shift from private employment, says Assocham in a study.

The construction projects across the state are getting delayed, cancelled or halted in progress as the realty sector has been jostling with steep and steady rise in prices of cement, steel rods, bricks and other input material and adding to this is labour migration, Assocham said today.

The Associated Chambers of Commerce and Industry of India (Assocham) interacted with around 150 people from industry across Karnataka including builders, contractors, developers, building material manufacturers, traders and real estate consultants to ascertain the impact of soaring construction prices and labour deficit on the state’s real estate and construction sector.

About half the respondents said that the spiralling cost of significant construction materials has been putting great pressure on project execution as they find it difficult to keep their margins intact. Steel, cement and labour are the key components and they alone make for almost 75 per cent of overall construction cost.

Over 30 per cent of respondents said that labour crunch was the biggest hurdle in their development as they are grappling with shortage of skilled labour.

Slow progress of real estate and infrastructure industry in the state is another significant reason as to why migrant workforce prefers staying and working near their native place for better stability over unsecured, laborious construction work, said the respondents.

And raw material costs have risen 10-15 per cent in last 10-12 months, and that is not a steep rise, adds Rangarajan.

“Construction material manufacturers and traders are not only coping with eroding profit margins but reportedly their stocks have also lost the market capitalisation by 15 to 20 per cent over the period of last four to five months,” highlighted the Assocham survey.

“Inflationary pressures leading to an abnormal price rise in food and basic cost of living have pushed the price of labour upwards. Besides, depletion of migratory workforce owing to improved locally generated employment opportunities from government welfare schemes have led to scarcity of labour and increased costs,” said Ravindra Sanareddy, chairman, Assocham southern council.

“If this scenario continues, the high input costs coupled with rising interest rates putting pressure on bottomlines of real estate and construction companies. They are passing on the burden to customers which could be in the range of 15-20 per cent over the past one year. If land acquisition becomes a tardy process in future as we have seen in the NCR region, it could shoot up land costs dramatically and make affordable housing beyond the reach of common man,” Assocham spokesperson told Business Standard.

Almost all the associates, builders and developers interviewed by Assocham said that it is a double whammy as their current projects are getting delayed by 12 to 18 months and are witnessing slowing sales as their losses rise.

Assocham in its report foresees revival of real estate projects across India with onset of the festive season.