Coronavirus impact | Construction activity grinds to a halt, CREDAI seeks bailout package

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With state governments across India announcing a lockdown to contain the spread of novel coronavirus or COVID-19, work at ongoing construction sites has come to a grinding halt, real estate developers told Moneycontrol.

"Construction work has been stopped at all sites," said Satish Magar, President, CREDAI, National.

"We support the government’s decision for social distancing. We have started with labourers on our construction sites. Most Credai-affiliated developers have stopped work on construction sites and we are making provisions for their safety, food and reaching out to them and explaining the gravity of the situation," said  Boman Irani, vice-president, CREDAI MCHI.

Catastrophe waiting to happen

Explaining the extent of the problem, Nayan Shah, President, CREDAI MCHI, said about one lakh workers -- primarily from Uttar Pradesh, Kolkata, Andhra Pradesh, Odisha and Jharkhand -- from the Mumbai Metropolitan Region (MMR) have gone back to their villages in the last 10 days.

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"Work has to start by April 5 or April 7 latest. If there is any further delay, monsoons would pose a big challenge in a city like Mumbai, leading to a catastrophe. Projects that are at the basement and excavation stage may pose a threat to the safety of surrounding buildings during monsoons if work does not start soon," he stated.

Developers spend around 20-25 percent and 60-65 percent towards construction cost for middle-income and lower-income housing units, respectively. "With construction workers returning back to their villages and construction coming to a halt, the loss would be in the range of 5-10 percent," Shah said
In MMR alone, 10,200 projects, worth Rs 5 lakh crore, are registered under RERA. The total area under construction is around 8 crore sq ft and the total value is Rs 5 lakh crore. Total loans taken by developers to finance their projects is around Rs 2 lakh crore. As much as Rs 2.5 lakh crore has been raised through the home loan route.

Shah wants the government to suspend all financial obligations including payment for premium to the MCGM/special planning authority/state government for one-year. "CREDAI MCHI believes that all premiums payable should be reduced by 75 percent for a period of five years."

Moreover, he wants all EMIs payable by all residential homebuyers as well those due from developers to be deferred by 12 months. The industry body is seeking zero stamp duty for six months and removal of property tax for the next one year.

Deadline extension

With construction work coming to a halt, possession timelines of projects need to be adjusted, realtors told Moneycontrol.

Niranjan Hiranandani - National President – NAREDCO, said, “With no work happening at construction sites and white-collared human resources in the ‘work from home’ mode – not to mention homebuyers not being able to visit construction sites/sales offices, the possession dates as mentioned under RERA filings look difficult to be achieved. Given this, authorities are requested to allow flexibility in terms of construction schedules and possession dates.”

Amit Modi, President Elect, CREDAI, Western UP, sees a delay of around seven to eight months in project completion on account of supply disruptions due to the coronavirus outbreak and the National Green Tribunal ban on construction last year. Since the NGT’s ban on construction “only 30 percent work was in progress and we stopped construction three days before the government announced the lockdown.”

Impact on daily wage labourers

Daily wage construction workers too suffer because of the lockdown. Besides those from MMR who have returned home, about 50,000 construction workers from the around 3 lakh labourers in Delhi-NCR have returned to their hometown.

Realtors say that they would not be deducting their wages. “We will be directing all our contractors at the sites to ensure that labourers are paid full money,” said Shah.

Magar said he has petitioned authorities to utilise proceeds of the Building and Other Construction Workers Welfare Fund. "All developers pay one percent as cess to this board, which holds about Rs 1 lakh crore in its coffers."

In Maharashtra, the BOCW Board has agreed to transfer an interim amount of Rs 1000 to all registered construction workers and also those whose registration is in process, he said.

Subhash Bhatnagar, National Campaign Committee for Central Legislation on Construction Labour (NCC-CL), too has written to the Delhi Chief Minister Arvind Kejriwal requesting for a transfer of one-month minimum wage into the bank accounts of construction workers registered with the Delhi Building and Other Construction Workers Welfare Board (BOCW).

This letter was in response to the March 22 order notifying a lockdown in the NCT (National Capital Territory) of Delhi until March 31.

“There are over 10 lakh construction workers in Delhi. Of which, 5.4 lakh are registered with the Delhi BOCW. Because labour officials of the Delhi BOCW suddenly stopped carrying out their responsibilities from May 2018 onwards, most construction workers do not have a ‘live’ registration. Even the digital upgradation of membership, which was started on November 16, 2018, has been very slow. In 16 months, it has been able to update only 50,000-60,000 construction workers as ‘live registrations’ of the over five lakh registered beneficiaries,” the letter said

Bhatnagar urged that all workers registered with BOCW be transferred one month’s minimum wage regardless of their registration status as ‘live’ or ‘pending renewal’.

States like Kerala, Punjab, Uttar Pradesh, Andhra Pradesh, Telangana and Jharkhand have announced emergency relief as ‘other’ benefits under their respective state BOCW boards in light of the current health crisis, without calling for a board meeting, the letter noted.

The Supreme Court last week categorised over two crore registered construction workers as ‘consumers’ making it possible for them to move consumer forums if any government denied them benefits promised under the welfare schemes implemented with funds collected as ‘cess’ from real estate builders.