Realty projects hit by labour shortages
Industry needs 4-5 mn skilled professionals a year, but has only 1 mn; situation worse in case of unskilled workers
Mumbai: A shortage of both skilled and manual labour is adding to project costs of cash-strapped property developers by delaying the launch of projects by up to one year.
add_main_imageA realty development typically requires around 50-60 clearances from various authorities and could take as long as 7-8 years for completion.
The labour shortage is prompting developers to delay new launches by nine to 12 months and projects may be delayed by 2-3 years if the situation is not addressed, said Sachin Sandhir, managing director, South Asia, at the Royal Institution of Chartered Surveyors (RICS), a qualification and standards body for the real estate and construction sector.
The real estate industry needs 4-5 million skilled professionals such as planners, architects, surveyors, engineers and project managers in a year, but has only around 1 million. In the case of unskilled workers, the situation is worse, Sandhir said.
Of around 50 million people employed in real estate, construction and infrastructure, only 2 million are professionally qualified. The sector needs 44 million professionals by 2020, according to Sandhir.
The Confederation of Real Estate Developers’ Associations of India lobby group pegs the overall labour shortage at about 40%.
The construction industry has traditionally depended on migrant workers who move from the villages to cities in search of work. Rapid urbanization of rural areas has increased employment opportunities for the local populations, slowing seasonal migration and contributing to the shortage of construction labour in the cities.
Developers and real estate consultants say the success of welfare schemes such as the rural jobs-guarantee programme, which ensures 100 days of work in a year to a poor household, has lured thousands of workers back home.sixthMAds
“Labour shortage is quite severe, partly because labourers are looking for employment opportunities in lesser labour-intensive jobs as there have been improvements in their literacy level and they are now capable of seeking alternative job opportunities,” said Brotin Banerjee, managing director and chief executive at Tata Housing Development Company Ltd. “To add to the above, the cost of living in big cities is also difficult to bear for them, coupled with the fact that most stay away from their families for months on end.”
The labour crunch comes at a time the industry is struggling with a shortage of liquidity after banks became cautious in lending to the real estate sector. Slowing economic growth, estimated at a decade’s low of 5% in the year ended 31 March, and high borrowing costs have deterred buyers.
Wage expectations of construction labour, too, have risen.
“Rising inflation has pushed up wage expectations for construction labourers still willing to work, impacting the bottomline of developers.” said Anurag Mathur, chief executive of project and development services and head of emerging businesses at the property advisory Jones Lang LaSalle India.
Indian construction workers are also less productive than their counterparts in other parts of the world, developers said.
The workers in Mexico are six times as productive as Indian workers, Jerry Rao, executive chairman of Value and Budget Housing Corp., which is developing affordable housing, said at an event on 3 April.
“In Germany, 1 million sq. ft of building can be constructed using just 100 workers, but in India it takes 1,000 workers to build a similar building in the same period,” said Santosh Sundararajan, chief executive at Vascon Engineers Ltd, an engineering, procurement and construction (EPC) services and real estate development company.
Experts such as Sandhir and Mathur say that India has a way to go before it closes the efficiency gap with more advanced countries, where construction labour tends to have the benefit of strong unions and also better trained in modern construction techniques and use of equipment.
Cost-sensitive Indian developers are cautious about the use of technology and equipment.
“It’s true that the work will be quicker if I use two cranes instead of one. But the cost would increase substantially, which at times become unviable for a project.” said Sundararajan. But adopting new technologies and reinforcing the pool of skilled labour is crucial for executing projects designed by international architects whom most big developers employ now. “Most foreign developers would be challenged to translate their blueprints to site without the active involvement of project development experts with a local foothold,” said Mathur.
Demand for urban housing and office space is set to surge.
According to a 2010 report by the McKinsey Global Institute (MGI), India’s urban population is set to increase from 340 million in 2008 to 590 million by 2030.
MGI projects that to meet urban demand, the economy will have to build between 700 million square meters (7,543.7 sq. ft) and 900 million square meters (9,687.5 sq. ft) of residential and commercial space a year. But the total real estate space including space for basic civic amenities in India is estimated at 10,145 million sq. ft by 2020, according to RICS.
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First Published:16 Apr 2013, 12:11 AM IST
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