While things are not as bad as initially feared, the Indian real estate sector has suffered greatly from the COVID-19 pandemic. Pune was no exception – like other cities, Pune also saw a complete halt in construction activity during the first pandemic lockdown period.
After the relaxations, we did see construction activity pick pace gradually> In fact, many previously delayed projects were getting completed in the last year despite the pandemic. Even now, when cases are rising in the PMC and PCMC regions, the partial lockdown in Maharashtra allows at least construction activities where workers are present at the site.
Large and medium-sized developers are able to take the necessary precautions at their sites, and can to some extent sustain their workers even during a slow construction period. However, smaller developers are in trouble – apart from lack of funds, smaller projects do not have enough space for labour camps.
Spiralling Construction Costs
It is not just the lockdowns that are giving developers a hard time. Rising prices of cement and steel over the last year have been a serious concern for developers. Developers have repeatedly sought the central government’s intervention in the cartelization by cement and steel manufacturers which is leading to unchecked price hikes.
The sudden and continuous upsurge in prices of steel, cement and other key raw materials used in construction has massively increased the overall construction cost for developers. This is a huge burden for all players – but again, it is the smaller, cash-starved builders who are most affected.
Everyone Pays the Price
Unchecked construction costs ultimately impact project deliveries and result in installed projects in many cases. This has negative consequences for all stakeholders. Developers are challenged to incorporate the additional construction costs without adding further to the burden of their customers. Homebuyers find property prices steadily going beyond their budget. And the government loses stamp duty and registration revenue which it can collect with better sales.
We have already seen that government intervention can have very positive outcomes. The recent decision to keep the RR rates unchanged is much appreciated, but it was the limited-period stamp duty cut by the Maharashtra government which had boosted housing sales in PMC and PCMC significantly. Asking for an extension by few more months to keep the momentum going is perfectly justified.
The current situation is extremely negative for real estate developers – not just in Pune, but across India. We earnestly hope that the government will consider supporting the sector much more. The real estate industry employs more than 40 million workers, supports more than 250 associated industries, and is a major contributor to India’s overall economic growth.
Moreover, housing is a basic necessity and government intervention is very essential – especially in unprecedented times such as the pandemic.