Cheaper properties, costlier construction predicted for Chandigarh’s real estate sector after lockdownUpdated: May 11, 2020, 17:40 IST
As the real estate sector resumes construction activity after lockdown restrictions are eased in the tricity, it faces a sharp increase in construction costs and buyer despondency.
Already struggling with sluggish prices in the pre-lockdown period, the realty sector is set to be hit by another wave of low demand and price corrections as home buyers are likely to struggle with economic uncertainty, say industry insiders.
After the lockdown was announced on March 24, the real estate sector, like all other economic activities, came to a stand still. There were no property transactions, and registration of properties stopped as the government closed down public dealing except provisioning of essential and emergency services.
“Even as most buyers are expected to adopt a wait and watch approach in the coming days, they can expect cheaper properties. The uncertainty in the economy, expectations of cheaper loans and price restructuring will keep most buyers on the sidelines,” said Rakesh Kerwell, ex-director (north) of DLF.
At the same time, for developers, constraints on project completion will mount.
“There is a severe liquidity crunch in the market. Most projects in the tricity are construction linked wherein payment to the builder is made on the level of construction completion. With construction stopping and no new projects coming their way, builders are struggling with low capital inflows. This will impact the delivery of projects,” added Kerwell.
RISING CONSTRUCTION COSTS
Meanwhile, developers contend with the fact that costlier construction material will restrict steep price corrections in the tricity. Prices of construction materials like cement, steel, gravel, etc have increased by 30% to 50%. Some of these will have to be passed on to the home buyer, say builders.
Harish Gupta, president of Builders’ Association, Zirakpur, said, “The price of a cement bag has increased by around ₹80. Before the lockdown it was ₹300, now it is ₹380. Prices of steel have increased by around ₹2,000-2,500 per metric tonne. Similarly, there has been a 50% increase in gravel prices from ₹21 per sq ft in early March to ₹31 per sq ft.”
FEAR OF LABOUR SHORTAGE
More than 25,000 migrant workers have registered with the Mohali administration for returning back to their native states. “There is growing concern about construction getting delayed as migrant workers begin to leave the tricity. But with builders restarting work, more workers are likely to continue with work. Contractors are also urging them to stay back,” said Sanyam Dudeja, director of the Jubilee Group.
In Zirakpur, builders on Sunday decided to restart construction on their projects. “Having sat idle for more than 50 days, labourers had started moving back to their native places. With the beginning of construction work, hopefully they will start earning their livelihood once again,” said Gupta.