Hrushikesh Huli is an interior designer based in Pune. With experience of almost 15 years in the field, he is one of the prominent names in this sector in Pune. But for the last two years and particularly in the past five to six months, his business has been facing a downfall. "You can say that almost 50% business is down as of now. The worst part is that there is no sign of improvement," he said.
There are a number of reasons for the current slowdown, according to him. But the main issue is that all of them are somehow related with the government's policies or decisions. “Take demonetisation for example. It ruptured the purchasing capacity of people. It also disturbed the real estate sector, where payment of labourers and other costs require liquid cash. But it didn't stop there. Within a year the GST (Goods and Services Tax) was imposed, which is the most flawed one. As a result, the remaining business was gone and gradually we reached the point where we are today," he said.
Several reports as well agencies working in the real estate sector have noted that GST has disturbed the sector to the core. “I work in the interior sector. So, if I do some work for Rs 10 lakh, the bill sometimes goes upto Rs 11.80 lakh. This is because GST is 18%. Now tell me, which customer would go for an interior designer if they have to pay such heavy taxes? So obviously, the investment in such things has come down substantially," he added.
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One thing to be noted is that the real estate sector generates a number of job opportunities – from employing labourers at the site to interior designers, plumbers, painters, electricians, etc., – several types of workers, both skilled and unskilled, are dependent on this sector. "There is one painter with us. He is one of the in wall painting, he understands the need of customers and designers very well. Earlier, there was a time that we used to book him two-three months prior to the work. Nowadays, he comes to my office every week looking for work. You can imagine how the situation is. He was dependent on our work, as soon as we stopped getting projects, his income has stalled too,” said Hrushikesh.
A recent report by Liases Foras, a Mumbai-based research agency talks about the slump in sales in the real estate sector. According to this report, in Mumbai Metropolitan Region (MMR), there are almost 3 lakh units pending for sale. This is affecting the starting of new projects.
Gautam Sawant is a Thane-based investor in real estate. He has been in the business for the last seven years. According to him, the risk factor in investing in new real estate projects has increased by many times. "Now, there are two projects each of 24 flats in Thane where I have invested in 2016. Till now, out of those 48 flats, 12 are unsold. It shows that whatever profit the builder was planning to make is now stuck in the project. Not only that, it also adds a certain cost of maintenance. So, the small time builders are not investing in projects any further. That has led to further slowdown in the market," he said.
The transformation of plans to actual investment has also gone down. According to Hrishikesh, many people who do have money to invest in small projects are not taking any risk due to slump in sales. "I have some friends who can invest Rs 3 to 5 crore in market. But they are worried with the uncertainty of sales and are not ready for such a big risk. If he invests the same amount in a nationalised bank, he will get good returns at the end of the fifth year rather than investing in project. That too without any risk. So the environment is not conducive for business these days," said Hrishikesh.
Even then, the financial stress is still bearable for Hrishikesh or Gautam or people like them. They can afford to wait for payment. On the other hand, the smaller workers like plumbers or electricians are facing serious issues in earning their livelihood.
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NewsClick met with Amol Sonone in Dombivali, Thane. He used to do plumbing work with three small builders in the city and the surrounding area. He said, "A few of us used to get contract for plumbing in buildings or bungalows. But for the last two months, all the projects of our builders have been stopped. So, there is no work. That's why I am nowadays driving this auto.”
Amol Sonone with his auto in Dombivli
His friend Madan Shelake is electrician. He compared his work during Diwali this year with earlier years. "Two to three years back, people used to keep calling for electrical work. Be it fitting a new fan or AC or even something like renovation of wiring and all. Also, there used to be work allotted by builders. But this year, we were literally at our home, without any work at hand. For me, this is the first such Diwali," Madan said.
Mumbai and its surrounding area is known as the golden goose of real estate business. There are a number of stories as well as scandals and even movies about land in city. But for the first time, the scenario is so dark that everyone in the real estate sector, from top to bottom, are being affected by the slump.
Construction is the second largest sector in the country after agriculture in terms of employment generation. However, the slowdown has led to the shutdown of several jobs.