Karnataka Realty Industry Faces Labour Crunch, High Costs

Karnataka Realty Industry Faces Labour Crunch, High Costs
05/07/2021 , by , in News/Views

Builders in Mangaluru and Hubballi-Dharwad are grappling with a shortage of skilled labour, rising cost of raw materials and a demand slump, challenges triggered by the second wave of Covid and the resulting lockdown. But the impact has been less severe on the real estate sector in Mysuru, where there is growing interest in independent housing units.

Experts tracking the property market say the situation may vary from one region to another, but the larger industry is going through a period of adjustment and needs government support in terms of clarity in rules and less regulatory pressure. According to DB Mehta, CMD of Allegro Ventures India in Mangaluru, the industry has had to constantly adapt over the past five years because of major events, from demonetisation, GST rollout and economic slowdown to the pandemic. The past year, 2020-21, has been particularly difficult: demand for housing collapsed by 50 per cent and value by 10 to 15 per cent.

“The supply side has been severely impacted. Prices of sand, aggregates and concrete blocks have gone up sharply and only 50 per cent of migrant construction workers have returned from their villages,” he added. 

Lower economic activity in Gulf countries also affected the market in coastal districts, especially Dakshina Kannada. NRIs form a large group of property investors. Naveen Cardoza, MD of Marian Projects Pvt Ltd, said new projects were likely to be expensive as developers would have to factor in GST, high material costs and increase in statutory fees. Land and construction costs have increased by Rs 400-500 per sqft in the past 18 months.

Dharwad, property sales have slowed down in all segments — low, middle and high incomes groups and luxury category. Builder Ravi N Deshpande claimed that new projects were not being announced because of the government’s height restriction for high-rises and delayed approvals by real estate regulator RERA. “People who want financing do not get it from banks for want of RERA registration. Another builder in Dharwad said that there should be a single window for obtaining clearances. “Currently, we have to approach 17 departments to get clearance for high-rises. We are paying high fees and huge fines for small violations. Even after having everything right, the completion certificate takes a minimum of six months,” he said.

In Mysuru, things are slightly better. Though prices of sites and apartments have been stagnant for the past year and pace of construction is slow, various infrastructure and investment proposals have kept developers optimistic. The trend was moving from just parking money in real estate to owning ready-to-construct sites. Rents have increased by 10 per cent. Builders say the biggest challenge is getting skilled labour. “Many skilled employees who left the city have not returned yet.


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