The Hindu Business Line : Input cost, labour crunch worry realty developers

According to Mr Avinash Prabhu, Managing Director, Skyline Construction & Housing, the buying cycle takes a lot of time now. "Unlike before, people are not taking instant decisions," he says.

`Correction welcome'

But he quickly says the stringent actions on the part of the Union Government and the banking sector have resulted in prices stabilising everywhere.

"If correction is going to strengthen the market, then it is welcome," he says.

But business has not been affected for his company. Causing more concern for developers like him are the rising costs of raw materials and shortage of labour. "High cost of raw materials is affecting the market as well as our margins," says Mr Prabhu. He points out that in the past two years, there has been a 30 per cent increase in the costs for developers.

Besides, there is also shortage of labour, especially skilled ones. "We do not have qualified professionals or engineers. There is no training ground for them and labourers too."

The answer for these woes might be in having a structured process in training of manpower for the real estate sector, Mr Prabhu says.

Projects on hand

The company has 10 projects, worth Rs 200 crore, under construction, wherein residential space of about one million sq ft is being developed in Bangalore. It also plans to develop 1.2 million sq ft of space this financial year - about 10 projects worth Rs 300 crore.

According to Mr Prabhu, 25 per cent of this might be retail space — "could be mall or single store format." Totally there are projects of about 7 million sq ft, which would fetch a realisation of about Rs 1,500 crore.

Though a major portion of the company's development is in Bangalore, Skyline has also tied up projects in Mangalore, Mysore, Chennai, and Kochi. Coimbatore and Hyderabad too are on its radar.

The company is likely to fund the projects through internal accruals and bank debt. It might look at PE funding at the project level. However, there are no plans of tapping the IPO market in the immediate future.

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