At last we are seeing some recommencement of the economic activities – many factories have started running and construction activity at many sites have started making usual noise. Though the activities are at low level its good see the wheels moving. However, according to some entrepreneurs it’s the government than the owners who were more keen in seeing the work is restarted at the earliest.
“The District Commissioner called a meeting and just asked us to start the work from Monday,” said gravel production unit owner in Haryana. “Everything else will fall in place on their own in due course,” the Commissioner also assured. However, the same gravel producer was saying that their concerns regarding royalty and taxes was never answered by the commissioner. Even the letters to the government seeking clarifications have remained unanswered so far. However, owners are happy to see that at least road construction work has started at some places and companies like L&T have started mobilising resources at the site. However, most of the demand, they expect would come from infrastructure companies than realtors. Real estate companies have not yet started any activities.
Some analysts are of the view that it’s easier to restart construction at the existing sites than in the new sites. It may take several months for the construction to start at new sites, the most important problem being mobilisation of workers and the equipment. Demand from the projects which are at the finishing stages are much stronger than rest of the projects.
However, construction (including housing construction) in rural areas was not affected much due to lockdown. Construction in rural areas stopped late, many days after the imposition of lockdown, and restarted much early too.
Cement price may play spoilsport
Though hardly a couple of weeks ago cement manufacturers restarted their operations it hasn’t stopped them from hiking the price immediately. Cement price hike ranges from Rs 10/bag to Rs 100/bag. According to some dealers, strong demand has resulted in cement selling at Rs 500-700 per 50-kg bag in some retail counters of rural West Bengal, against a normal selling price of Rs 300-350 per 50-kg bag. In other states too, prices are at higher levels compared with pre-lockdown period prices. According to dealers, prices have been hiked by Rs 100/Rs 40/Rs 25/ Rs 10 per 50-kg bag in Hyderabad/New Delhi/Indore/Bhubaneswar soon after the partial lifting of lockdown. These price hikes are mostly from dealers end and not by the manufacturers. Many dealers used the prevailing increased prices to clear their old stocks.
However, most of the customers know that this is a short term phenomenon and once the lockdown is lifted completely price will come to their pre-lockdown level or even less than that. This has also resulted in construction work at sites going slow just to see cement prices coming to their realistic value. Some dealers are justifying the hike as the manufacturers have completely withdrawn various regular discounts to them.
Logistic is still an issue
Owners were complaining about the problems faced by the truck drivers at the borders though problem seem to have been sorted out now with the speedy issue of necessary permissions. Though initially there was problem of availability of trucks, mainly due to non-availability of drivers and cleaners, that too seem to have been sorted out. According to All India Motor Transport Congress General Secretary Navin Kumar Gupta, there are not more than 20 per cent of the 76 lakh trucks in the country are on roads at present.
The truck owners were more interested in seeing the resumption of activities than anybody else due to concerns regarding EMIs.
However, drivers refuse to ply trucks on long distance due to lack of food availability en route. Situation can improve only when lockdown is lifted completely throughout the country. Companies have largely liquidated their inventory in warehouses, to rural markets.
Migrant workers’ issue
However, the biggest problem faced by the developers and project managers is that of migrant labour. Presently not much problem of workers is felt as the activity has not started on full swing. Present availability of labour is enough to perform activity at 20-30% of the capacity. The government has already allowed the migrant workers stuck up in cities to return to their native villages. This would reduce labour availability for construction for the next few months. Further, migrant labourers could delay coming back due to fear of infection. This is likely to prevent construction activities reaching to the pre-lockdown level in the near future. If the construction activity doesn’t reach the full potential it may have cascading effect such as poor cement demand, etc.
Some employers in factories and construction sites feel that new requirement concerning hygiene and social distancing at work place may become a new tool for authorities from labour department to harass the employers to fleece more money from them.
Realtors facing liquidity crisis
Recommencement of construction by the realtors may not happen immediately unless their issues relating to liquidity is addressed to immediately. The slowdown in new bookings and lack of sales during lockdown has impacted cash flow of most of the realtors. According to experts, a cut in prices of near-finished/finished inventory and investments from last mile funds like SWAMIH may help to get out of the current situation for some of the realtors. Though the recently announced moves by RBI is welcome most of the realtors want higher support in the form of tax cuts/onetime restructuring of loans.
It’s also true that most developers have not been able to act due to projects being in the cities of Mumbai, Bangalore and NCR, which are still the hotspot/red Covid zones. So, there is uncertainty as to when the construction will resume as Monsoon too will set its foot in June thus impacting the construction activities (excepting last mile constructions).
On the whole, it’s good to see the resumption of construction activities (though on a low scale) after a month of shut down but it may take several months, if not years, to reach the pre-lockdown level. Meanwhile, the government needs to take proactive steps to resolve the pending issues which will also go a long way in boosting morale of the entrepreneurs as well as employees and workers.