Recently, Gujarat’s Chief Minister Vijay Rupani unveiled a Rs 140-billion ‘Gujarat Atmanirbhar’ Package – a rescue plan for the industries and businesses. The features of the package include a big push for the real estate sector, with a Rs 10-billion allocation as subsidy for 1.6 lakh affordable houses in the state including Rs 5.25 billion of interest subsidy on loans up to Rs 2.5 lakh availed by shop owners and small business owners. Apart from this, one lakh homeless tribal worker beneficiaries will get concrete houses in their native places with a total allocation of Rs 3.50 billion. But there are multiple issues affecting the industry.
Construction World organised a free webinar on ‘Resetting Real Estate in Gujarat’ with a distinguished panel of experts to discuss and deliberate on this topic. The webinar began with presenter Pratap Padode, Editor-in-Chief, Construction World, welcoming the guest panellists to the session. The panellists included industry stalwarts – Viren Mehta, Senior Director, JLL; Balbirsingh Khalsa, National Director-Industrial & Logistics and Branch Director-Ahmedabad, Knight Frank (India); Taral Shah, Managing Director, Shivalik Infrastructure; Paras Pandit, Chief Managing Director, Sheetal Infrastructure; and Dilip Ladani, Chairman, Ladani Group and Vice President, Rajkot Builders Association. The webinar was sponsored by Gold Partner Electrotherm and supported by Knowledge Partner Housing.com.
Notably, in the beginning of May, not a single migrant labourer was reported to work at the construction sites of a leading real-estate developer in Ahmedabad. And, real-estate players in Gujarat feared that relaxations provided would stall works in the sector.
Commenting on how the pandemic and the lockdown has affected the sector in terms of deliveries, Shah highlights that the Gujarat RERA given six month extension for the projects, which he feels is sufficient time as major Ahmedabad developers normally keep between 3-3.5 years timeline for projects. “There is also a buffer of three months and we now have these six months. So overall, we have nine months extra for construction, so we don’t see much delays.” He adds that major Ahmedabad players started with 30 per cent labour post the lockdown. Adding that the Gujarat construction market largely depends on migrant labour, he believes that work will regularise same as pre-COVID in the next two to three months. The Gujarat RERA Authority had about 6,746 projects along with 1,111 agents registered until mid March, and has extended the completion deadlines for real estate projects in the state by six months.
According to Pandit, the real estate sector in the state was in a bad shape even before the pandemic and the lockdown cannot be blamed for the state of the sector alone. “There was panic even before the lockdown, and now the panic has also added in the form of labour issues and finances.” Besides, there will be an increase in labour cost as well as finances. According to him, government uncertainties and policies related to migrant labour were a major issue. “Developers not only in Gujarat but across India will have to play their own parts and do things by themselves to revive the sector as nothing much can be expected from the government.”
But the question remains: How can prices be reduced when the cost of construction is not?
Commenting further, questions Khalsa that if the developers sell at a lower price, where is the margin for the developers? I doubt there is enough margin for the developer to be given as discount by him, as far as Gujarat is concerned.
Shah, on the other hand, has a different opinion. He avers that Gujarat has all the major cement plans – UltraTech, Ambuja, JK Lakshmi, among others. He cites a report which highlighted that major cement manufacturers had supplied more in the rural areas of Gujarat in May 2020 than they had in May 2019. He adds that Gujarat also has some good steel companies like Electrotherm (ET TMT). “Their supply was constant and we did not face any issues in terms of supply for our projects.” Speaking about ceramics too, he says that Morbi is a ceramic hub and so ceramics supply was not an issue too. “The problem was with labour.”
According to Mehta, from the Rs 140-billion package for Gujarat, there is not much for real estate. And so to expect a big boost for the sector from this package is something to question. He adds that by and large, “the government has done too little although it has been taking proactive measures but this doesn't have a larger impact that you can boost the economy.”
Shah does not see a huge loss of demand in the future in Gujarat as inventory is coming down too.
Khalsa, speaking on the NRI purchases in Gujarat, avers that the state stands at No. 4 in terms of FDI in India. “We need to maintain this number in Gujarat. This will come with government measures in terms of ease of doing business and promoting industries so that more people invest in the manufacturing units and add Capex.” There is a growth of about 10-11 per cent CAGR in NRI investments in India – which is much bigger than the private equity investments coming in. The ecosystem of Gujarat is well established and so the state will continue to attract NRI investments, adds Khalsa.
Developers in Gujarat are also working on several marketing and sales strategies to attract customers to invest in properties. Evidently, demand is the major issue, said Padode on a concluding note. “But as long as we can reduce the fear and improve the prospects of things getting back to normal, the demand will definitely rise. But probably, the government also needs to step in and offer some reliefs wherever they can help push the demand up.”
For this and more on Resetting Real Estate in Gujarat, watch the full video.
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