GST effect: minor contractors halt activities

Small-time building contractors in and around the city, who were into constructiion of individual houses and selling them, seem to have tweaked their business model post-GST implementation.

The GST, combined with rapid rise in cost of steel, sand and other materials, has pushed them into a situation where they now undertake building contracts alone for prospective house owners.

There used to be a marked preference among prospective property purchasers for individual houses on the outskirts of the city. But the business has been hampered severely due to the 12% levy on sale of constructed individual houses.

It does not make business sense for contractors to pay the tax and sell houses for costs inclusive of the 10% registration charge, leave alone the escalation in the cost of construction materials, explained Babu, a contractor.

He says business for small-time contractors may remain stagnant for months to come.

“Only a few months ago, it was possible to sell individual houses at the rate of Rs. 1,500 per sq ft to buyers in the middle-class. Not any more. With the cost of steel escalating to Rs. 65,000 per tonne from Rs. 45,000 just two months back, and sand becoming dearer by the day, the margin will be meagre even if newly constructed individual houses are sold for Rs. 2,000 per sq ft. But then, buyers are hard to come by for this rate,” Mr. Babu explained.

According to Murali, another builder, masons and workers have been rendered jobless in large numbers due to the setback in construction activities.

The lull in construction activities is also due to the difficulty masons face in using M-sand. Most of the workforce in the construction sector is now idle. Only a small section undertakes repair works, he says.

Masons, who charged heftily earlier, are now prepared to work for Rs. 700 a day. Painters too are willing to work for Rs. 600 a day. Incidentally, manpower shortage has now ceased to be a problem for the construction sector, Mr. Murali adds.

The wait for the construction cost to come down is bound to be endless.

Eventually, for the construction activities to revive again, the buyers will have to reconcile to reality and prepare their minds to shell out heavily. But it will take time. Till then, being in a ‘wait and watch’ mode is better than undertaking risks and facing losses, the contractors say.

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