New Delhi: While real estate developers have lined up ambitious plans to expand their business across India, completing these projects on time may be challenging because domestic contractors already have too many jobs to finish, according to a report by broking firm Prabhudas Liladher.
The report says that execution of projects could face a wall as “domestic contractors already have large order books on account of both infrastructure development and corporate” capital expenditure.
Core Issues: Domestic companies are venturing into construction on their own, compounding the problem
Developers agree that finding a good quality domestic contractor is becoming increasingly difficult. The contracting workforce in India is largely in the unorganized sector consisting of many small-size firms with low skill levels. There are only a few Indian contractors who can execute large projects.
“Yes, there is a huge shortage of quality contractors in India,” said Kunal Banerji, vice-president, corporate communication and marketing, Ansal API. “The ones that are there already have their order books full.”
Domestic contractors are also venturing into large infrastructure projects. “They (contractors) are starting off their own infrastructure projects. They are doing huge projects in India, Vietnam, Malaysia and Gulf,” Banerji said.
The shortage is forcing firms to look overseas to plug the gaps. Ansal is scouting for contractors overseas in places such as Thailand and says it has tied up with a firm in Thailand for a project in Lucknow. It still works with local firms and architects such as Hafeez Contractor.
India’s largest developer by market value, DLF Ltd, plans to develop 50 million sq. ft annually in the years ahead. The company has so far developed 250 million sq. ft. “We are ramping up our construction expertise,” Rajeev Talwar, group executive director, said. “We also finance machinery used for our projects,” to help speed up the process and ensure quality. DLF has a joint venture with the UK-based infrastructure and construction group Laing O’Rourke and is planning to tie up with more international construction companies.
However, Parsvnath Developers Ltd says that so far it has not faced any problems.
“We do our construction in-house and we work with mid-sized construction firms,” B.P. Dhaka, spokesperson for Parsvnath, said. Parsvnath pla-ns to develop 160 million sq. ft over the next four-five years and currently construction is under way on 74 million sq. ft.