As the COVID-19 outbreak has hit the entire economy hard, the impact of COVID19 on construction industry is dramatic and the industry is facing obstructive difficulties in financial pressure, labor shortages, and supply chain concerns at the moment. In an effort to control the distribution of the infection, entire cities, or rather countries have walked into lockdowns, jeopardizing supply chains and daily life, and suspending everyday business.
Coronavirus has a huge impact on building projects, but the legal implications vary from country to country and contracts. Throughout the period the COVID-19 world pandemic is weakening various sectors. Even though some activity is likely to persist in the short term, the work is expected to halt soon due to several factors such as disruption of supply chains, shortage of subcontractors and materials, and the termination of contracts to control expenses.
Globally, the outlook is not yet clear, due to the current severe pandemic situation. We are closely tied up in the era of global integration. No one will be exempt if the world economy falls into depression-including us. The general situation is currently heading not in a good direction.
Vedant Goel, the Founder of www.ipocorner.in stated, “The main issue for the construction sectors is the capital crunch. The investment has been majorly reduced due to the blocked cash flow of developers. Commercial businesses have been exaggerated by the massive fluctuations in retail which has further led to a decrease in rental income. A bigger impact could be seen in future development projects if this situation is not diminished. The business has been slower, not only for developers but also for consultants.”
Impact of COVID19 on Construction Industry – Dippak Wani
To know more about the COVID impact on Construction Companies, we talked to an expert, Mr. Dippak is Chairman of Wani Group.
Mr. Dippak Wani is a Managing Director of Wani Group, who has been honored with the prestigious Rajiv Gandhi Shiromani Award for his exemplary contributions and achievements. He has also been awarded the Samaj Bhushan by Gujarathi Samaj in 2008 and been honored by Janata Sahakari Bank Ltd. and OBC Bank for his outstanding achievements, professional excellence, and exemplary personal contributions to banks. Wani Group caters to industrial, real estate, and infrastructure projects. Serving Clients like BMW, Godrej, Essar, the brand strives to serve values with integrity, passion, trust, and commitment. Mr. Dippak Wani brings in rich experience and efforts to helps drive the Group to newer heights with every passing year.
Related Blog: Impact of COVID19 on IT Industry
Q1. What is the Impact of COVID-19 on Construction Industry, and Real Estate?
The long term construction companies will likely have to contend with decreased depends as governments are facing rising deficits. By 2020, the impact of this disruption can add to downward revisions in all G20 markets. The negative consequences, including immediate interruption of global supply chains and weak final demand for imported goods and services, are significant.
As an individual owner, the potential impact of COVID on contracts for the construction industry can quite be varied from delay, disruption, cost overruns. This can also result in the right to suspend or terminate due to low buying capacity and with the issue of employment. With regard to the Contracting viewpoint, my idea is different. The time coming will be difficult to come, as people who have already invested or were willing to, will be more cautious. These projects may come but with a lot of thought processes. However, if I go down the line for years to come, many people have sentiments to move out of China, as people coming to India will face local issues, or maybe the govt. policies could defer; but in the long run, I am optimistic about the whole process. He also added that ‘Warehousing may not have an impact, but manufacturing companies may have in terms of contracting.’
Q2. Will it be difficult for Business Owners to sustain for 2 years?
Yes, even though I do not wish to get negative, however, many business houses will certainly get wiped off. The companies would need financial support from the government. Survival will become difficult.
It’s not only about the residential and commercial projects that are dampened by low GDP Growth and Unemployment. But it’s also the question of sustainability as it’s becoming difficult to survive sitting at home. The future is expected to be wear for the foreseeable future.
Q3. What’s one advice you would like to give to Business Owners?
If you ask from my business strategy, I think we would
- Re-assist the cost, be it direct or indirect. We would see what value addition we can do on the cost, and how we can minimize the cost.
- Even though we are not sure about the labor situation because if there is no labor, profits would cut as external manpower would be needed. The construction industry operates with comparatively thin profit margins but requires considerable resources to push both material and labor-related work. Subsequently, any effect on labor movements and supply chains will cause major financial pressures quickly.
Even though we have been trying to do our part amid this pandemic and have been very holistic and in support with our manpower and team. The only question is How long?
Q4. What do you think is the difference between the 2008 Great Recession and the situation as of now?
The 2008 Great Recession was systemic and took hold of the financial system for the first time; the Great Pandemic of 2020 is a cyclical crisis caused as a response to a health crisis and has brought the economy to a sudden standstill.
However, the only thing that could be told is that it was believed that even if India managed with a GDP of 6-7 percent, it was all right. However, seeing how the situation is susceptible. Every country stands in a very different situation. But both crises share uncertainty as a key factor, but surely Covid-19 is more critical than that.
Q5.What do you expect from the Govt. for MSME Industry?
The government should implement appropriate quantitative easing measures to boost development, with the effort that not only focuses on the short-term but rather on the crisis. It is in fact time, that government should help us. MSME Industries are in deep problem. Looking at the larger picture, MSME Industry result and contribute to employment in a larger way.
In lieu of this and support of MSME, we should get waived off in interest, the advances should be reduced, and accessibility of manpower should be increased.
Q6. Any suggestions for small and medium business owners?
Looking at it this way we can see how erratic the sector is with this pandemic. It is hard to say as no one actually knows the impact; no one knows how large it will be, also how long it will in fact last, and what could possibly be its full impact. We need to look at our fixed or variable costs. As there’s a lot of pressure, cost-cutting should be looked at. It’s also important to maintain the level and balance, rather than to serve with aggression in business.
The continuing outbreak of the Covid19 world and its effect on the economy in the quarter ended March pushed the sentiment of Construction Company to its lowest level of all time. The impact of the construction companies’ economic disruption will vary greatly, and will actually continue to vary from one state or subway area to another.
Accordingly to the recent report, it also aims to provide a clear view of the construction industry’s future and to determine what the industry needs to do to move forward, overcome current challenges and build on the progress that is taking place.
Everything in construction comes down to money and time. COVID-19, the Novel Coronavirus declared a pandemic by the World Health Organization, has been described as the ‘greatest danger to the global economy since the financial crisis.’ Contrary to previous global health crises, the COVID-19 outbreak has immediate and far-reaching consequences because the global economy is now more interconnected than ever before. Economic output has slowed significantly, and the effects are felt all over the world with the impact of covid19 on construction industry.
However, it is time to be optimistic and get ready for the virus’ impact, as seemingly much remains to be seen.
** This series is sponsored by IPO Corner