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Shortage of labour holding back activity in the Indian property markets, says RICS

Sentiment in the real estate industry in India is generally positive and the outlook is upbeat, according to the inaugural India Construction Market Survey from the Royal Institution of Chartered Surveyors.

The survey, covering the second quarter of 2012 says that a shortage of labour is a key factor in limiting activity but despite the slowing economy and a more modest pace of growth in construction output as indicated by official data, workloads for most parts of the industry are continuing to rise.

The RICS India Construction Survey has been designed to capture the sentiment of professionals working in the sector. The survey is both timely and forward looking, with a clear goal that it should not only highlight current trends but also signal at an early stage, any significant changes that are taking place in the sector.

Responses to the survey from professionals working within the private housing arena were particularly upbeat, says RICS. They were also relatively encouraging in the infrastructure space, private industrial and private commercial sectors. Additionally, new enquiries surrounding infrastructure projects and pipelines were also noticeably strong.

It says that significantly, the concerns over the macro picture in the country do not appear to be adversely impacting construction prospects. Workload expectations over the next twelve months indicate a remarkable degree of resilience; however there are concerns with respect to increasing profitability over the period. The survey also suggests that the construction sector is currently struggling to push up output prices sufficiently in order to offset rising input costs that the industry is continuing to grapple with.

Lack of demand, planning, regulatory issues and access to finance are other key factors highlighted as inhibiting construction output. However, the shortage of labour has been sighted as the most critical constraint. The survey also indicates that the use of BIM has increased over the quarter and similarly more than half the respondents suggested that the demand for sustainable solutions in buildings has grown during the second quarter.

The construction industry is poised for growth in the real estate and infrastructure sectors in the second half of 2012. Housing, retail, healthcare, roads, power and transportation segments are expected to have 10 to 15% growth over the first half of the year with construction spends of the order US$75 billion, according to RICS member V. Suresh, chief executive officer of HIRCO.

‘ Construction costs have shown a clear 15% increase with input costs of materials and workforce. There is a critical shortage of over 30% of skilled workforce and supervisors. This is an area where concerted efforts are needed. Softening the interest rates will give increased liquidity and provide a stimulus to construction pace,’ he explained.

The shortage of labour may have shaken the market sentiment to some extent, according to Kamal Meattle, chief executive officer of Paharpur Business Centre. ‘However, the recent surge in workload of private housing and infrastructure has added much impetus to the scenario. In today’s cut throat competitive environment, especially in construction industry, making higher profits could not be a feasible idea. A niche has to be created, which can, in a way, make your project distinctive and therefore higher margins. The coming 12 months is a crucial time in terms of maintaining the equilibrium of workload and labour force,’ he said.

The sentiment in the construction market continues to be positive, said Sateeshkumar Ranganathan, regional managing director for India of Sweett. ‘There seems to be an evolving trend towards mechanisation given the growing skill shortage in the industry,’ he added.

Via : PropertyWire


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