Work not in progress
CASH CRUNCH After demonetisation, construction work in the realty sector hit as builders struggle to pay workers
Construction work has decreased by 50% since demonetisation was announced on November 8 – SS Khurana, Ludhiana-based real estate consultant
It’s been more than 50 days since the demonetisation of higher value currency notes was announced but construction work in the region’s realty sector is still struggling to get back to normal.
Construction workers in the sector are paid in cash and in most cases they are daily wagers. “After demonetisation, this process stopped because of the paucity of cash. It is tough to fix the quantum of construction work suspended, but most builders are affected. The problem is acute for smaller builders in the region who haven’t outsourced their work to bigger contractors,” says SAS Nagar-based LC Mittal, 47, director of Motia Group.
“In our estimate, construction work in Bathinda and its neighbouring areas fell by half after demonetisation was announced,” says Sukhdev Singh Mahnikhera, 55, the Bathinda Property Dealer Association president. “We are seeing migrant labour headed back to their native states though their number is not large,” he says.
SSKhu rana ,42, a Ludhianabased real estate consultant, says :“Construction work decreased by 50% since demonetisation was announced.”
Similarly, in Amritsar, Vikas Mehra, 46, managing director, Uddhav Realty, says: “Construction activity is down by 30%. It is more in the case of smaller builders and in the unorganised sector.”
Demonetisation is also becoming a pretext for builders to justify possession delays. “It is true that builders are facing a cash crunch and struggling to pay the labour but some of them are sitting on large unsold inventory. Demonetisation and the cash crunch that followed are \just an excuse to slow down the construction work and delay possession. The builders are telling customers that they are helpless as they don’t have cash to pay their workers so projects are not being completed in time,” says Khurana.
Demonetisation has forced builders to start paying their workers through direct transfer or cheques. “They have no option now but to open bank accounts for workers or ask them to do so. But this process is proving to be time consuming. Meanwhile, workers are not getting paid. This is impacting the pace of construction,” says Mittal.
The current labour problems are expected to be short term. “After the demonetisation announcement, the demand in the sector plummeted sharply. There are concerns that if the demand doesn’t pick up, builders will struggle to complete projects. This will lead to largescale labour retrenchments in the sector,” says Khurana.