With new and cheaper technology and a steady drop in prices of cement and steel, the lower- and middle-income groups can hope to realize their dream of owning a house.
The economy is going through a slowdown. The housing sector, booming in the earlier part of 2008, is feeling the heat. But there is hope this year, if opportunities are handled well. The slowdown holds a possibility — affordable housing.
The once-booming construction industry in West Asia is now reeling under skyrocketing material and lab our costs. With over 70 per cent of the planned projects stopped, a million skilled construction laborers are heading back home to India. But this can very well give an impetus to the domestic construction industry. Because of the meltdown, engineers and skilled workers will be available at half the lab our cost they had charged six months ago. Workers who had charged Rs.300-400 a day would now be available at Rs.150-200 a day. And since lab our costs contribute as much as 30 per cent of the construction costs, this is significant.
“These skilled laborers can be absorbed by the building industry here to construct houses with high technology, which take less time and consequently incur less cost,” suggests R. Kannan, Ingrates Infrastructure Services, and Chennai. For instance, pre-fab and pre-cast houses were not taken up on a large scale earlier because of a shortage of laborers qualified enough to handle the technology.
Pre-fab houses are assembled on site by frames fabricated elsewhere, along with board walls of cement and gypsum-concrete. Pre-cast houses use aerated and light-weight concrete, cast elsewhere and moved to the construction site. Pre-cast and pre-fab construction is the trend worldwide, though it has not caught on much in India so far, with the exception of commercial structures such as factories. Now, with a skilled labour pool available, the housing sector can take advantage of this technology.
This technology will work well in large-scale housing, because with volumes, economies of scale can be achieved.
These pre-fab and pre-cast structures have an environmental advantage because they consist more of material such as fly ash and gypsum (a waste product of the fertilizer industry) and less on cement. And since such houses can be built in a quarter of the time it takes for building in the conventional style, construction is faster and, consequentially, economical.
Prices of steel and cement are coming down, because of demand- supply dynamics, with demand now at a low the world over. “In 2007, it was Rs.23 a kg; it went up to Rs.48 a kg in 2008, and we had to purchase steel at the peak rate because of ongoing projects,” says M. Ganesan, a building trade professional in Chennai.
“The price of steel has now come down to around Rs.33 a kg from its peak of Rs.60 four months ago,” says Sapp any Pillai, Vice-Chairman, Institution of Valuers.
This means that prices of products such as hinges, GI pipes and grills will come down.
The price of steel is expected to fall even further.
And with lowering petroleum prices, the cost of PVC products is expected to fall. Mr. Pillai says the cost of bricks has also come down.
Cement remained relatively stable at between Rs.260-275 a bag last year; but cement prices are expected to fall this year because of lack of demand. Gravel, glass and wood did not see much of a cost fluctuation last year.
As Gopinath Rao, former president, National Institute of Valuers, says, “Hard times are ahead in the construction industry.” But every challenge holds out an opportunity too.
While the impetus last year came from the premium segment of housing, this year, affordable housing can hog the show, provided the design is frill-free and sensible. “While affordable housing implies low-cost housing, it does not imply low-quality housing,” Mr. Kannan says. Low-cost housing is about the omission of those much-advertised frills and luxuries (such as saunas, pools and gyms), which were built into the housing complexes designed last year. Mr. Ganesan says, “2009 will be a moderate market, but the lower and middle segments hold promise. Our surveys show that people are still ready to buy the deluxe single- and double-bedroom flats, despite the economic slowdown.”
Arguably, the construction industry is the second largest industry of the country, after agriculture. Well thought-out and sensible tactics can save this industry from a free fall alongside looming recession. With right designing, slotting and marketing, this meltdown can well be a turning point for the construction industry.