Construction industry share in GDP to stay below 8% [October 2011]

The contribution of construction industry in GDP will stay below eight per cent during the current fiscal 2011-12 as against 8.1 per cent in 2010-11 owing to an unregulated price hike in key construction material together with rampant shortage of workforce at all levels, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).Domestic construction industry has been jostling with steep and steady rise in prices of cement, steel rods, bricks and other input material which has risen by over 30 per cent since 2009, apex industry body ASSOCHAM said.“Inflationary pressures leading to an abnormal price rise in food and basic cost of living have pushed the price of labour upwards. Besides, depletion of migratory workforce owing to improved locally generated employment opportunities from government welfare schemes have led to scarcity of labour and increased costs,” said D S Rawat, secretary general of ASSOCHAM.
 
Steel, cement and labour are the key components and they alone make for almost 75 per cent of overall construction cost, points out the study. ASSOCHAM interacted with about 1,500 people from the industry including contractors, developers, building material manufacturers, traders and real estate consultants to ascertain the impact of soaring construction prices and labour deficit on India’s real estate and construction sector.
 
All the raw materials have been hit by rising prices, besides, sharp rise in lending rates by banks has hit the realty sector severely, said majority of the construction material manufacturers and traders adding that instead of passing on the raise in raw material cost to end consumer they are cutting down the production.
 
“About 55 per cent of respondents representing the real estate firms said that access to capital is getting difficult by the day as banks have reduced lending to realty players forcing them to take money from expensive sources.

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