Reverse migration of labours might be hurting the developers across the Top property markets of India, Track2Realty finds that it is rather helping the developers in Tier II & III cities. Labour availability at reduced cost is a pleasant surprise for developers in smaller cities.
Alok Rawat, a Project Manager with a real estate company in Noida was about to quit his job in September last year. He was transferred to Kanpur with the mandate that the project of the given builder takes off as per the schedule. But his assessment at the ground level convinced him that it was just not practical and hence time for him to move on to some other job.
Reason: logistical challenges, labour shortage and no contractor in Delhi-NCR agreeing to move himself and his labour force to a Tier II city. However, just before this Civil Engineer could put up his papers, he was surprised with repeated calls by the contractors, including the one that refused earlier, asking for work in the very same city.
Similarly, Pawan Verma, a home buyer in Patna was pleasantly surprised when the builder sent a letter to the home buyers, including him, that the earlier letter citing Force Majeure delay of the project stands null & void. The home buyers of the given project were asked to arrange their finances for the balance payment as the project would now be delivered on time.
The reverse migration of the labour force has created an unprecedented situation in the real estate markets across the country. While the developers in the Top 10 cities are struggling to retain the labours at the project site, their counterparts in Tier II and III cities are gaining by default.
What is icing on the cake for the developers in these smaller towns now is the fact that they are getting the labour force at a much lower cost. Explaining this trend, Sandeep Agrawal, a property broker in Patna says that the labours were getting their daily wages in the Delhi NCR region in the range of INR 350-500, depending upon the project. But now they are more than willing to work at INR 250 in places like Patna, Kanpur, Kochi etc where they are stationed in proximity to their home towns and the cost of living is much lesser, compared to the metro cities.
“Both the project cost and the project timelines have improved across the Tier II and III cities due to availability of the regional labour force post the pandemic. It is a win-win for both the developers as well as the labourers. Two things have accelerated this process – one is that overall there are fewer curbs on construction activities in the smaller towns and secondly the NRIs who are coming back have a preference for the home town as against the metro cities,” R Shetty, a contractor in Kochi decodes the trend.
How is labour migration helping Tier II & III cities?
Reverse migration ensuring labour availability in Tier II & III cities
Labour force closer to their home towns available at lower rates
Project timelines & labour cost reduced for the developers in these cities
Win-win for both as cost of living lesser for labour force in Tier II & III cities
Expertise of Top Tier cities reaching out to the smaller cities?
More launches in pipeline across Tier II & III cities with demand spike & labour availability
Not a new phenomenon; MNREGA also witness to this trend
Overall lesser curbs on construction activities in smaller cities
NRIs coming back to home towns and not metro cities
It is not just the reverse migration of labours from Top 10 cities that is benefitting the housing projects in smaller cities. Requesting anonymity, the India Marketing Head of a Dubai-based developer admits that they had no choice but to release the Indian labour force over there. The construction in many of Dubai projects where the skilled & unskilled labour force from India has been working is at standstill. As a result, this labour force back home is looking for some work closer to their home towns.
As per the industry estimates, the share of organized real estate in India’s Top 10 cities is nearly 75 per cent. The rest of the Tier II and III cities only have one fourth of the market share. However, this ratio could change dramatically due to Covid. Cities like Patna, Ranchi, Kanpur, Lucknow, Bhubaneshwar, Coimbatore, Kochi could be the next demand drivers of real estate. These cities are being benefitted by three factors – the labour force preference to work closer to the home town, the work from home realities pushing young professionals from these cities to home towns and the NRIs preference of home town over the metro city.
The economic researchers tracking these trends have a caveat here. According to them, this trend is not new. Even at the time of initial push of MNREGA (Mahatma Gandhi National Rural Employment Act, 2005) the developers in the metro cities had to take a bit of a hit. The issue of labour shortage was the talking point of all the real estate debates during those years.
Moreover, this trend of reverse migration benefitting the Tier II and III market is not uniform across the property markets of 30 odd Tier II and III cities. The balance is tilted in favour of those cities, like Patna, Bhubaneshwar, Cuttack, Kanpur, Lucknow, Kochi, Coimbatore etc, from where most of the labour force has traditionally been migrating.
This also raises a fundamental question as to whether the labour force working at the project sites of national players with organized processes is carrying that expertise to the smaller developers in these cities. There is no conclusive answer to this since only the new & upcoming projects would provide some empirical evidence of the same. But what could definitely be vouchsafed at this point of time is the fact that in the months to come there will be more new launches in Tier II & III cities than the traditional top cities of realty business. The market share of these smaller cities, of course, would not be as miniscule as it is now.
Ravi Sinha
@Ravitrack2media
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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