Harsh Bhutani, Executive Director, Hydrobaths Ramco Marketing Fraught with challenges, the industry had nothing to celebrate in 2013. The year 2014 too, may pose the same challenges, unless right steps are taken at the right time. The coming months will certainly call for innovative solutions in building materials and methods. Also, the market is ripe for foreign investors and we shall see some big players entering the market this year, says Harsh Bhutani, Executive Director, Hydrobaths Ramco Marketing. Excerpts from the interview.
To what extent have cement prices impacted the housing sector?
Real estate is the second-largest employment generating sector in India after agriculture, contributing about 5-6 per cent to its GDP. Cement is the key material in any form of construction and thus, a hike in its price will impact the housing sector. Cement prices went up by approximately Rs 7 per kg in the last few months and it hit the real estate market badly. If this situation continues, it will impact the overall real estate market and will lead to a delay in the delivery of projects as well as an increase in real estate prices; this will have an adverse effect on the economy on the whole.
What are your expectations about cement prices in 2014?
The cement industry may continue to face some challenges in 2014. Certain factors like rising labour costs and Indian Railways Busy Season Surcharge (BSS), which saw a hike from 12 per cent to 15 per cent in 2013, may continue to affect the industry. However, the government can help by initiating policies to help the sector. If these issues are not solved, cement prices will remain unstable, affecting the economy as a whole. With an estimated 15 per cent hike in the overall construction cost due to cement price hikes, the common man who will have to shell out more for basic commodities. Housing is one of the most basic needs for a family and with the rise in prices, citizens will be highly pressurised.
Do you foresee of increasing use of RMC for the realty projects in India?
Innovation is the key to progress in all forms of industry. In India, an estimated 480,000 residential units across affordable, mid- level and luxury housing segments will be delayed and there is the urgent need for faster methods of construction to meet this crisis. Other issues include rapid urbanisation, tremendous shortage of skilled labour and the need for hassle-free construction methods. Thus, I believe that conventional methods of construction involving RMC will see an increase but on a parallel track, pre-fabricated material and brick- less technology will gain prominence to meet the demands of this huge sector.
What are the major bottlenecks in the industry and what needs to be done to address them?
For any sector to progress, there needs to be a stable economy. 2013 was very unstable with the falling value of the Indian rupee, rising rates of inflation, tight liquidity, all of which led to the price hike of ancillary industries and eventually, a rise in the price of the projects.
Rising labour cost is a big challenge. Migrant labour from Bihar constitutes around 50 per cent of the unskilled workers employed in these sectors nationally, and labour shortages from states like Bihar result in 35-50 per cent higher wage bills for real estate firms. The government needs to address all these issues.
What new markets trends are we likely to see in 2014?
India has huge potential as a booming economy, and infrastructure and real estate are important determinants of that growth. Looking at the real estate sector, the government has already introduced several regulations like the Real Estate Regulation Bill and Real Estate Investment Trusts, which will provide a boost to the sector. With the huge need for housing in India, new methods of construction to speed up the construction process will be used by the developers. India is gaining prominence on the global map as a place for investment and we can expect a lot of foreign real estate companies to be entering the market. These companies will introduce pre-fabricated products and New Age technologies which will not be as labour- intensive and will make construction a lot faster. Looking at various pressure faced by the builder community, we expect them to look at innovative materials and methods for construction. Among the few alternatives, the most promising are products which can be used in place of brick and cement which are pre- fabricated products. The cost of construction using conventional options (such as brick, cement) is registering an increase, to the tune of 15 to 18 per cent. Products that assists in reducing construction costs and increasing construction speed by three times will be most relevant. This brick-less technology wall system is 1/6 the weight of conventional 4.5ö brick walls. Pre-fabricated products have thinner walls, thus providing more carpet/ saleable area for the project.Growing environmental concerns and awareness about green buildings will also be reflected in the construction methodologies in the coming years. The relevance of energy-efficient buildings has assumed greater significance in the light of fast depleting energy resources, energy scarcity and environmental pollution.
What are your expectations postelections?
We expect boost the infrastructure industry and refined policies to tackle the issues of inflation, cash flow, transparency in the approvals and acquisition processes of land. Thats should help to uplift the sector.
With an estimated 15 per cent hike in the overall construction cost due to cement price hikes, the common man who will have to shell out more for basic commodities.
Cement prices went up by approximately Rs 7 per kg in the last few months and it hit the real estate market badly.
The cost of construction using conventional options (such as brick, cement) is registering an increase, to the tune of 15 to 18 per cent.
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