Skill Bugbear – Financial Chronicle – 18-Dec-2014

December 26, 2014 - Uncategorized

Recently, Raman Raghav, the little man about town, wanted what many Indians aspire for the most – to construct his own house. He completed the loan formalities and got in touch with a contractor. The contractor told him he could begin work only in February – that is when he would have his construction labour in place. For the time being, the labour are gone or preparing to go on a leave for the festive season in mid-January. Raghav realises his options are limited.

To Raghav, the contractor went on to explain how it works. Once the festive season ends, workers get back to their jobs. There may be new additions, raw hands who have to be trained on the job. There are others, experienced hands that will not come back; they have found work elsewhere or have switched to other domains. For the contractor, though, it is a continuous cycle – as inevitable as the sunrise and sunset.

Workers employed in the construction sector, within the built environment, comprise skilled workers, including supervisiors, technicians, foremen and tradesmen. The semi-skilled and unskilled worked includes helpers and construction labour. Now with the economy on the upswing and the real estate sector poised to pick up, legitimate questions are being asked whether India has the desired skills to match its own pace of development.

A RICS report, ‘Real estate and construction professional in India by 2020’, says of the total labour workforce, about 90 per cent are unskilled workers.

It says the number of skilled workers wanted by 2015 will be approximately 4.76 million, which is expected to touch the 5.75 million mark by 2020. In 2005, the number stood at about 3.27 million.

In other words, requirement for skilled professionals was growing by roughly about 3.84 per cent.

The vast majority of unskilled construction labourers – indispensable contributors to the real estate industry – are supplied largely by contractors and sub-contractors. A majority of them are either totally illiterate or have done little schooling. They are basically trained on the job. Since skills are not a consideration, many of them are raw and need to be taught to use a ruler, lay bricks, paint walls, mix cement and other chores.

As a contrast to skilled labour, the total number of unskilled labourers stood at 25.6 million in 2005 and has been growing at a CAGR of 9.15 per cent.

There are many reasons for the shortage. Lack of adequate training is one big factor. Two, manpower supply has not kept pace with growing demand for real estate and construction. Only a few institutions have been able to train the candidates, bestowing on them the desired skills.

According to Anil Mithas, chairman and managing director, Unnati Fortune Group, the real estate industry needs 4-5 million skilled professionals such as planners, architects, surveyors, engineers and project managers in a year; at the moment, the industry has only around 1 million professionals who fit that bill.

In the case of unskilled workers, the situation is worse. Labour shortage is severe, partly because workers are looking for employment opportunities in lesser labour-intensive jobs. They have started learning new skill sets and are now capable of seeking alternative job opportunities, said Mithas.

Pulla Rao, who oversees the HR function at CyberCity Builders and Developers at Hyderabad, said shortage of labour was a serious problem for the entire industry causing many projects to delay.

The MNREGA, which guaranteed 100 days employment in a financial year to every household, is a contributing factor. Many workers have preferred to stay closer to their homes and take what work came their way, he said. On the positive side, it has certainly helped in improving the bargaining powers of the labour, Mithas explains.

Coupled with these is the prohibitive cost of living in big cities, prompting many of them to stay close to their villages or small towns.

Prime minister Narendra Modi’s emphasis on three talents – skill, scale and speed – finds its deepest resonance in real estate, say industry representatives. According to C Shekar Reddy, president national, Credai, real estate is a major contributor to the country’s GDP but is struggling to cope up with continuously rising demand of skilled labour throughout the country. What is bad is that this gap is widening by the year.

With slowing migration and rapid urbanisation, projects are taking off in non-metro destinations and the labour is not returning to the big cities, where construction activity is at its peak.

What’s worse, industry bodies say real estate labour is not available even at higher wages. As a result, many realty projects – among others – are progressing at a snail’s pace. Time overrun will result in cost over runs. The cost of acquiring and retaining talent is going up.

As per National Skill Development Corporation (NSDC), the incremental requirement of skilled manpower in real estate services by 2022 is pegged at 14 million.

According to Reddy, government’s support is crucial for training skilled labourers. There is need to invest in skill development, training and education of the workforce, considering that technology is needed to be operated by skilled workers.

Citing research reports, the industry body says that around 123 million of India’s urban population is likely to seek professional help for building houses by 2020. The demand, during the decade ending 2020, will be to the order of 95 billion sq ft of real estate space for residential, retail, commercial, industrial and civil projects.

This means an average demand of 8.7 billion sq ft of realty space has to be built every year.

Reddy said the government at the centre has revived hopes for the sector with its intent on imparting skills. The NSDC has been working in the same direction but the results are far away from expectations, mainly due to the scale.

Representatives of the real estate industry, which is the largest employer after agriculture, have spelt out their commitment to skill development. For instance, Credai Maha­rashtra has taken up an on-the-job site training programme called ‘Kushal’, with NSDC.

Under this, Credai pledged to provide vocational and technical training to labour on-site. Under Kushal, the expenses of on-site material and infrastructure are borne by developers and the rest is funded by NSDC. Under this, more than 138 centres have been opened by 75 developers with about 60 expert trainers.

Credai is also keen on a Greenfield institution for skill development in the real estate sector. Among others, it suggested that the labour cess contributed by the developers and constructors should be utilised for the cause of skill development. Estimates suggest that the labour cess collected in a year could be in the region of Rs 18,000 crore.

According to Reddy, training unskilled labourers is challenging. First, not many are attracted and second, they must be willing to stay in the industry for a reasonable length of time to acquire the skills. The other thing, which restrains many from opting for skilling programmes, is wages. They earn on a daily basis and will not be able to earn on training-day salaries. This makes such training modules less attractive for them.

Credai suggests that the training modules should be attractive and those attending it should not lose their earnings. In its training programmes, Credai provides uniforms and toolkits as well as a stipend to attendees.

“Companies are trying to minimise the impact of shortage of labour by opting for greater mechanisation,” adds Mithas. Delays in delivery schedules or a cut down on orders is not uncommon due to worker shortage.

He said companies are also looking at organising labour recruitment camps offering better benefits and wages. Developers in Noida, for instance, are relatively better placed as skilled, semi-skilled and unskilled labour are available aplenty in their main catchment states, Bihar and UP. A lot of labourers migrate to Noida as it is easy for them to commute between Ghaziabad, Agra and Mathura. But Noida is just one stop in a large unchartered area.

 

Financial Chronicle

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