Mumbai's real estate sector is staring at another potential challenge after the Brihanmumbai Municipal Corporation (BMC) suspended water supply to construction sites amid a worsening water situation in the city. The move comes as delayed monsoon rains and declining lake levels have pushed Mumbai's water reserves to critical levels, with lake stocks falling to just 10.35% as of June 16.
While developers believe the impact will remain manageable if monsoon rains arrive soon, an extended disruption could affect project execution, increase costs and weigh on profitability across the sector.
Developers May Face Higher Costs
Construction activity relies heavily on water for processes such as curing concrete, plastering and other civil works. With municipal water supply curtailed, developers may be forced to depend on alternative sources such as private water tankers or recycled water, both of which come at a significantly higher cost.
Chintan Vasani, Partner, Wisebiz Developers, says that construction costs could rise by 5-10% if the water supply restrictions continue beyond a few weeks. Such an increase would add to the cost pressures already faced by the sector from higher input prices.
"Water is a critical input in the construction process. If developers are compelled to procure water from alternate sources for an extended period, overall project costs are likely to increase materially," a real estate developer said.
Margins And Deliveries Could Be At Risk
Analysts and industry participants estimate that a prolonged disruption could lead to an Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin impact of around 4-5% for developers, particularly for projects that are currently in active construction phases.
Apart from higher costs, the sector could also witness delays in project execution and handovers if water shortages persist. Any slowdown in construction activity may affect delivery schedules, potentially delaying revenue recognition for developers.
Among listed companies, investors are expected to closely track the impact on developers with significant exposure to the Mumbai Metropolitan Region (MMR), including Lodha Developers, Oberoi Realty, Godrej Properties and Sri Lotus Developers.
Real Estate Sector Is Already Battling Multiple Challenges
The latest disruption comes at a time when the real estate sector has already been grappling with several execution-related challenges.
Earlier this year, labour shortages linked to migration during election periods affected project execution across several markets. At the same time, rising prices of cement, tiles and other construction materials have increased overall project costs for developers.
The BMC's decision therefore adds another layer of uncertainty for the sector, particularly if water reserves continue to remain under pressure.
For now, developers remain hopeful that the monsoon will strengthen in the coming days and replenish the city's reservoirs, says Keval Valambhia, real estate expert, Urban Planner and Architect.
Real estate experts believe that if water supply restrictions are lifted within the next two weeks, the impact on construction activity and financial performance is likely to remain limited.
However, should the shortage persist beyond 15 days, developers may face a combination of higher costs, delayed deliveries and margin pressure, making water availability an important factor for investors tracking Mumbai-focused real estate companies.
Also Read | Mumbai Water Crisis: 10% Home, 20% Commercial Cuts; Supply To Pools, Construction Blocked
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