Real Estate Developers Resort to Layoffs, Pay Cuts as Covid-19 hits Sales
Hit by the coronavirus pandemic, real estate developers have resorted to layoffs and pay cuts and are focusing on cost control measures as sales are likely to remain muted in the coming months, according to industry experts.
The real estate sector has been facing headwinds since the past three-four years following demonetisation, RERA and GST rollout as well as delays in approvals. The Covid-19 crisis has further impacted market sentiment and sales.
According to industry estimates, the realty sector employs 60-70 lakh people, including three lakh white-collar employees. As per estimates by MyHiringClub.com and Sarkari-Naukri.info, around two lakh employees (including the white-collared) in the real estate sector are expected to be laid off due to the coronavirus crisis. More than 60,000 jobs have been slashed so far, they added.
“The sector is having a major impact on their sales and this will directly hit companies’ profitability. Now there are major chances of default in the pending payments.
“Maximum developers are already facing liquidity crunch and so they are now focusing on cost control, doing layoffs, closing their offices and trying to centralise their work and manpower. This situation is expected to continue till the current financial year,” consulting firm PropConsilium Infratech’s CEO and MD Rajesh Kumar told PTI.
Realty player Prajapati Group Managing Director Rajesh Prajapati said the company had to cut jobs and salaries by 15-20 per cent each.
“We are downsizing the company and doing away with extra costs as the collections have dropped significantly and sales have also muted. While there are layoffs in the non-essential services segment, for others we are resorting to pay cuts,” he said.
According to Prajapati, many developers, including grade A players, have either laid off staff or cut their salaries. “On an average, it is to the extent of 15-20 per cent. Some players with better reserves have given a temporary pay cut with an assurance of giving back the amount once sales improve. Some have sent their staff on furlough,” he added.
A report by non-broking real estate research firm Liases Foras said that for each month of the lockdown, there is a revenue loss of 8.3 per cent. The report stated that by June-end, revenue loss in the residential real estate market alone will stand at 26.58 per cent, which will rise to 35.07 per cent by July-end.
“FY20 was believed to be the turnaround year for the sector and the Indian economy. There was an uptick in the sales during the fiscal, but Q4 FY20 wasn’t encouraging and we ended with 3-year low annual sales.
“The lockdown…has further pushed the entire industry behind by a minimum of 5 years,” realty body Credai’s Action Committee Spokesperson Ajay Ashar said.
CIEL HR Services Director and CEO Aditya Mishra noted that as many as 30,000 white-collar jobs are expected to be lost in the sector in the next three months. “As things stand now, most companies are not building new projects; they are finishing the previous projects to honour their commitments and protect their reputation.
“As a result, every area of the business right from design, architecture, project management, engineering and procurement to sales, marketing and facility management is getting reviewed and efforts are on to right-size those,” he told PTI.
Mishra further said if the Covid-19 situation gets under control in another two-three months, jobs in the construction sector will return to normal levels by January-March 2021. “However, the real estate sector would take longer to get back to normal levels. I expect it to be July 2021,” he added.
According to HR firm TeamLease Services, departments which are being impacted include customer support, sales, customer relationship staff, pre-sales demonstrators and tele-callers.
“The industry has seen slowdown and further slowdown has happened with the outbreak of Covid-19, thus whatever has been the manpower reduction has largely happened…in further months, companies should now look to further consolidate their workforce and move them to professional third-party workforce management companies…
“…it shall help them to stay lean in terms of fixed cost and look for ways and means to work out multiple attractive sales strategies, further ramp up and ramp down (as desired based on market developments),” its Business Head- Industrial Manufacturing and Engineering and General Staffing, Sudeep Sen said.
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