Real estate industry facing twin challenges

Liffy Thomas and
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The real estate industry is in dire need of tone-up measures. — Photo: K.Pichumani
The real estate industry is in dire need of tone-up measures. — Photo: K.Pichumani

: The real estate industry is facing the twin challenges of rising cost of construction materials and a shortage of labour, which is being increasingly felt with the city expanding.

Work on almost 50 per cent of the upcoming residential projects in and around Chennai have either been temporarily suspended or progressing at a slow pace due to the increase in the price of construction materials and labour shortage, says P.Manishankar, president, Federation of Tamil Nadu Flat and Housing Promoters Association.

While new projects are being announced by developers, especially along Rajiv Gandhi Salai, GST Road, Oragadam and Sriperumbudur, these problems have resulted in the delivery schedules being extended by at least three months and an increase in the project cost.

One cubic foot of sand now costs Rs.60 compared to Rs.22 four months ago; one brick is priced at Rs.7 as against Rs.3 and cement prices have gone up from Rs.185 per bag against to Rs.280.

Various reasons are attributed to the dearth of labourers at many construction sites. The trend of son following in the father's footsteps is changing as more and more masons and painters are keen on their children taking up better paying jobs.

The number of migrant labourers coming to the city, mainly from Orissa, Bihar, West Bengal and Andhra Pradesh, is on the decline with many of them finding work in and around their native place. The NREG programme has also led to lesser number of workers coming to the city in search of jobs. All these factors have resulted in an increase in the construction cost going from Rs.150 per sq. ft. to Rs.300 per sq.ft. over the last six months, while labour charges range between Rs.300 and Rs.600 depending on the kind of work per day, adds Mr. Manishankar.

“The city needs 20 to 25 per cent additional labour to complete the existing projects,” says M.K. Sundaram, secretary of Construction Industry Development Council and managing director of Chozha Foundations.

Property consultants say a three to six month delay in a project is becoming common, but further delay happens when it does not have the required regulatory approval.

After booking a flat in June 2008 with Jain Housing's Naksatra project in Chinna Nolambur, it was this August that A.Prasanna, working for an IT firm, got the keys to his home. “When we booked, I was told the project would be complete by July 2009. As they could not meet the deadline they compensated us with a portion of the amount for about six months,” says Prasanna, who is one among the owners in the 512 apartment.

S. Samuel Satish, who booked an apartment in an ongoing project in Kelambakkam last month, has been assured that the apartment would be handed over to him by June 2011.

“I am hoping that the builder completes the project on time otherwise my budget would be disturbed drastically,” he says. Sandeep Mehta, Managing Director, Jain Housing and Constructions, says the time taken by the authorities concerned to give the approvals for the projects is impacting the deadline.

Mr. Sundaram agrees getting planning permission from the Chennai Metropolitan Development Authority sometimes extends to six months.

Referring to the Naksatra project, Mr. Mehta says there was a delay of six to eight months and as part of the agreement the customers were compensated.

More developers are going for mechanised construction materials such as hollow block units, concrete block units and readymix concrete. Tamil Nadu Academy of Construction, which is expected to be opened next month in Chengalpet, should come as a ray of hope.

“In the first year nearly 15,000 unorganised workers would be given training but before that nearly 3,000 trainers need to be identified,” says Mr. Sundaram.

For aspiring home buyers, developers suggest not to book a project if the planning permission is still pending. “One can insist that the interest component on the home loan should be paid if there is a delay of three months in the project, provided that it is incorporated in the agreement,” he adds.




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