Dealing with the rising cost of construction in the Indian Real Estate
If time is money; then saving money ensures good times. When one looks at a home as being more than just four walls, a floor and a ceiling; one also needs to take a good look at the upward price trends of constructing the walls, floor and ceiling across the past couple of years.
I personally look on the implementation of the Real Estate Regulatory Act (RERA) as a major step in dealing with rising cost of construction: it brings in a cost-effective, efficient and properly monitored process of construction, which is part of the process of corporate manner of working for Indian real estate.
Let us move to basics: cost of material used for construction, including ‘basic building blocks’ such as sand, cement and steel, have sky-rocketed in the past couple of years. All these have resulted in overall increase in construction cost.
The real estate industry has been working on cartelization by a section of manufacturers and suppliers of construction material, matters have been taken up with the Competition Commission of India (CCI). In turn, the CCI has made observations in some cases, upholding the real estate industry’s contention. This was necessitated because hike in prices of construction materials was found to be happening at a rate which did not seem justified and impacted cost of construction in a major way.
One of the new thought processes in containing cost of construction is about working on alternatives which offer similar qualities, but at a lesser cost. Fly ash, for example, is being increasingly used to keep costs under control without compromising on quality of construction. Using internal wall finishes which do away with the need for additional surface preparation are another example. Using crushed stone in place of sand as also finely-ground construction debris have been increasing at construction sites. The bigger change is brought about by new methodology, which includes using Ready Mix Concrete (RMC) instead of mixing concrete in batches on site.
On a similar note, use of Myvan shuttering technology which ensures quicker finish without any compromise in quality, as also construction cranes for high-rise construction help save time.
A major aspect of keeping project costs in control can be done at the construction site. For the real estate industry, the solution to rising costs of construction material includes ensuring faster completion of the project by saving on time, reducing as also eliminating wasteful practices at construction sites, ensuring proper monitoring of usage of construction and working towards quality control not just as regards quality but also quantity – by ensuring minimum wastage during the construction process.
It is not just construction material which is a problem, labour costs have also increased in tandem with increasing demand for labour, creating a second challenge for the already stressed real estate industry. As customer need for high-end products in real estate rises, so does the requirement of better trained labour for specialized work related to construction as also ensuring a smooth and shiny finish, on par with global standards. This aspect is being dealt with by on-going programs wherein labour working at various construction sites are being enrolled in classes and courses which enhance their skill-sets. Under the banner of the
National Real Estate Development Council (NAREDCO), we have taken up such courses that offer skill enhancement options to labour working at various construction sites. Going beyond just labour at the site, we are also offering courses for construction and project management, so that on-going projects get monitored for quality control as also proper management of time and cost.
Taxes, levies and duties are another bugbear. We have seen GST implementation for real estate as something that needs to be done in a better, in a manner that results in efficient, better tax-saving.
Assimilating Global Best Practices is something that definitely helps. So, across construction sites, as these practices are implemented, cost efficiency will definitely increase. Time-bound, quality control driven construction which leverages present-day technologies as also use of alternative material will go a long way in ensuring we successfully deal with hiked construction costs.