Labour Crunch Threatens Cost Overruns, Developers Hope For Festive Boost

India's harsh curbs to contain the pandemic stalled economic activity, leaving millions of low-paid daily wagers out of job. The nation's biggest migration followed as workers set out for their homes hundreds of kilometres away on foot.

One of the biggest sources of employment for them was the real estate sector in Asia's third-largest economy. According to industry lobby Credai-MCHI, about 75% — or 7 lakh of the estimated 9 lakh — on-site real estate workforce migrated to their native states during the lockdown from Mumbai Metropolitan Region alone. That exodus is hurting now. While the government reopened the economy gradually, there aren't enough workers to operate construction sites, causing delays and cost overruns.

Earlier this month, the lobby wrote two separate letters to the Maharashtra government and the Ministry of Railways, seeking help in providing affordable railway transport for workers, primarily from Uttar Pradesh, Bihar, Madhya Pradesh, Jharkhand, West Bengal, and Odisha, to return.

What Developers Fear

It is estimated that the overall project cost may rise 8-10% on account of delay by six-nine months and corresponding shortage in labour and material, according to Amit Goenka, managing director and chief executive officer at Nisus Finance.

“Delays create a huge financial pressure on the project including pressure of lenders, vendors and buyers. It also subdues demand, reduces valuations and creates a significant depression in the project's feasibility,” Goenka said. “Lenders and investors turn cautious to pessimistic in financing and investing in projects that are slow or stuck and have completion risk.”

What Workers Want

According to Rajkumar Jaiswal, president of Maharashtra Building and General Labour Union, the migrants have only two primary demands:

• Payment of their pending wages as many developers are yet to pay them for pre-lockdown work.
• Providing medical insurance in the case that they get infected while working in the city.

“There is a fear in the minds of the people that if they come back, they will be infected. Family members are also not allowing them to return to the city,” said Anand Gupta, a Mumbai-based developer and chairperson of housing and RERA committee of Builders' Association of India. Workers also want free transportation, safety measures, better accommodation, increase in number of toilet blocks, he said.

What Developers Are Offering

Credai-MCHI said it has mandated a number of safety measures at their construction sites to:

• Social distancing to be followed with temperature checks before commencing work.
• Weekly visit by a doctor on site for regular medical check-ups of workers
• Regular fumigation of staircases, lifts, helmets to maximise safety
• Staggered meal times to avoid unnecessary crowding
• Special quarantine facilities for any worker who has tested positive for the new coronavirus or show symptoms.

While developers are ready to bear a one-time cost like bus and air fares to get construction workers back to the city, the success ratio has so far been abysmally low, said Bhavin Thakker, managing director, Mumbai and head, Cross Border Tenant Advisory, Savills India.

Thakker said developers are wary of the higher cost of labour that they may have to incur to ensure health and safety measures at the project sites. As a result, he said, the cost to operate any site has increased.

Why Workers May Be Wary

While workers may be in dire need to jobs as the Indian's economic growth has collapsed because of the lockdown, they are wary of promises. Just a few months ago, they were forced to walk hundreds of kilometres in the absence of any transport. And what was promised at the beginning of the lockdown wasn't delivered.

In April, Maharashtra announced assistance of Rs 2,000 each to active construction worker registered with the Maharashtra Building and Other Construction Worker's Welfare Board.

But, according to a report published by Youth for Unity and Voluntary Action, among the workers living on work sites registered with board, less than a third who received the cash transfer even though 87.64% of them have bank accounts.

Developers Optimistic

The government has started special trains and developers themselves are offering help to bring back workers. After the industry's demand, it announced another 80 long-distance trains from Sept. 12.

That helped another 10% workers to return to Mumbai, a Credai-MCHI spokesperson told BloombergQuint over the phone.

Still, the return of 65% is awaited.

“Many construction workers are cyclical migrants and return to their villages before the monsoon to help sow the Rabi crop,” said Rajan Bandelkar, president, Naredco West, and convener, housingforall.com. “We estimate that the remaining construction workers will return by Dussehra or Diwali.”