An Open Letter

01 Apr 2020

Smt. Nirmala Sitharaman,
Hon’ble Minister of Finance,
Ministry of Finance,
Government of India 

Hon’ble Finance Minister
Nirmala Sitharaman,

The construction industry employs 35 million people, which is more than the population of Australia or Malaysia, and contributes 8 per cent of India’s GDP. Unlike manufacturing, this sector takes months to mobilise the 4Ms – men, materials, machines and money – for projects. Currently, owing to the COVID-19 pandemic, the supply chain has been disrupted. Droves of workers have boarded trains to the safety of their villages as sites have downed shutters with the national lockdown. In the Mumbai Metropolitan Region alone, 10,200 projects, worth Rs.5 trillion, are registered under RERA. The total area under construction is around 80 million sq ft and the total value is `5 trillion. Total loans taken by developers to finance their projects are around Rs.2 trillion. As much as Rs.2.5 trillion has been raised through the home loan route. Given the gravity, it is most important that we contain the pandemic, as the longer this takes the more we lose economically and in terms of progress on development.

The Prime Minister has stated that the 21-day lockdown can help us save getting pushed back 21 years. That said, the sooner we can get our construction projects up and running, the quicker we can serve the daily wage needs of 35 million households. China is speeding up construction on major infrastructure projects to mitigate the economic impact of the pandemic. The construction on 89.1 per cent of 11,000 key projects (those in hard-hit Hubei Province are not included) has been restarted as of March 20, as per the National Development and Reform Commission (NDRC), China. Further, 97.8 per cent of the 533 key transportation projects supervised by the NDRC have been under construction, with all major railway projects resuming operation. Construction on some 97 per cent of major highway and waterway projects, 87 per cent of airport projects and 86 per cent of water conservancy projects has also resumed. China is fast-tracking fund allocations from the central budget and increasing special-purpose bonds for local governments to bolster infrastructure construction. Over 1 trillion Yuan (about US$ 144 billion) worth of special-purpose bonds have been issued to major projects.

Recently, you announced a relief package of Rs.1.7 trillion to help workers from this sector. The Labour Minister has written to all states to dip into the Rs.520 billion Construction Cess Fund to give financial and allied benefits to construction workers through direct benefit transfer (DBT). However, according to data till March 31, 2019, released in response to a Lok Sabha query, cess collected in the welfare funds added up to Rs.496.74 billion. Of this, Rs.193.79 billion had been spent, so close to a fund of Rs.300 billion is available but is mired in administrative red tape.

Here are some more recommendations to help the real estate and construction industry recover:

  • Waiver of interest on mobilisation advances provided by the government for the next three months with immediate effect.
  • Payments of all the retention money of the past six months to be released without bank guarantee with immediate effect for better cash flows at sites.
  • Automatic extension of time of three months to be provided for all projects.
  • Pending bills to be paid within seven days by the Centre and state governments for immediate cash flow requirements at sites.
  • Support to state governments with funding to release pending payments by state governments.
  • All EMIs payable by all residential homebuyers as well those due from developers to be deferred by three months. Alternatively, the interest payments of the next three months may be recovered in equal instalments over a period of the following 12 months.
  • Deductions on running account (RA) bills, such as recovery of mobilisation advance and retention money, can be withdrawn for the next few months with immediate effect.
  • The Rs.300 billion cess fund lying with the state governments is entangled in administrative loops and needs expeditious facilitation.
  • Cover salaries and wages for tax-paying SMEs for three months if employees are not laid off.
  • Zero stamp duty for six months and removal of property tax for the next one year.
  • Possession timelines of projects to be adjusted as defined by RERA.

  • Thanking you,
    Pratap Padode, Editor-in-Chief

    Also watch my comments on the effect of Coronavirus on the Construction Manufacturing Industry. Click here:

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