Title of your contribution:

Impact of COVID-19 on Construction Industry in India

Last name: Chakraborty, Gupta,Islam

First name: Aditi,Nisha, Minhaj

Role: Paper Presenter

Institution: Globsyn Business School

Email id: aditi.pgdm10nc@[Link], nisha.pgdm10nc@[Link],

minhajul.pgdm10nc@[Link]

Keywords: COVID-19, SARS-CoV-2, India, economy, safety measures

Introduction
The corona virus disease 19 (COVID-19) is a contagious respiratory and vascular highly
transmittable and pathogenic viral infection caused by severe acute respiratory syndrome
corona virus 2 (SARS-CoV-2), which emerged in Wuhan, China and spread around the world.
Genomic analysis revealed that SARS-CoV-2 is phylogenetically bat viruses, therefore bats
could be the possible primary reservoir. As of May 8th, 2020, in India, 56,342 positive cases
have been reported.

On 22 March, India observed a 14-hour voluntary public curfew at the insistence of Prime
Minister Narendra Modi. It was followed by mandatory lockdowns in COVID-19 hotspots and
all major cities. Further, on 24 March, the prime minister ordered a nationwide lockdown for
21 days, affecting the entire 1.3 billion population of India.
On 30 January, India reported its first case of COVID-19 in Kerala. In March, the transmissions
grew after several people with travel history to affected countries, and their contacts, tested
positive.

Source: [Link]

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Data Source:

India: [Link]

Global: /[Link]

As the world works to manage the current COVID-19 outbreak, the focus is rightly on communities
treating those infected, and collectively containing the virus to limit global health impact. Current
market volatility has highlighted the significant role supply chains play in the overall success and
valuation of global corporations. The study found that 73% of the businesses surveyed encountered
problems in their supplier base, and 75% faced problems with production and distribution. (according
to McKinsey)

The COVID-19 pandemic is challenging businesses to think in unique and different ways. As demand
surges for essential products, companies have been scrambling to streamline their supply chains to
secure immediate operations. At the same time, there is pent-up demand waiting to be released for semi-
essential and regular consumption categories that do not qualify for the ‘essential’ tag.

Besides the need to adapt, supply chains also have the opportunity to reach the next horizon of
operational effectiveness, to leverage emerging digital supply chain business models, and to transform
the company into a digital supply chain.

The risks posed by COVID-19 for workers include loss of employment and income, health risks
associated with working conditions, and declines in productivity. These risks are heightened in certain
supply chains linked to essential goods and services and for certain workers, such as migrants, workers
in the informal economy, and those who lack social protection.

India’s supply chains will go through huge transformations in the next few years as the impact of
COVID 19 continues to challenge our demand and supply frameworks. With widespread disruptions,
supply chains are either broken or severely affected. As ongoing supply side issues start getting
addressed, we will see demand contraction in several industry segments creating further disorder.

The first and most important change will be the rise of domestic sourcing to make supply chains more
local. Government policies also promote domestic manufacturing.
Impact of COVID-19 on Construction Industry in India

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In this challenging time where the effects of the pandemic are being felt in every part of the world,
the real estate sector has been widely affected. Countries from all over the world are applying strict
and extreme measures to break the chain of Coronavirus..

Compared to last year, residential property sales have plunged majorly in the first quarter of this
year. From 78,510 units in 2019 to 45,200 units in 2020. Even though RBI announced a 75-basis-
point repo rate cut bringing it down by 4.4%, the benefits of this are more likely to be seen in the
long term. According to various sources, housing sales declined by an average of 30% in major
metropolitan cities.
The overall impact of the novel coronavirus, or COVID-19, on the construction sector in India has
been estimated at Rs 30,000 crore per day, an analysis by KPMG revealed. An analysis by KPMG
revealed that the overall impact of the COVID-19 on the construction sector in India has been
estimated at Rs 30,000 crore per day.

The pandemic is also likely to reduce investment in construction-related projects by 13 to 30

percent, which is likely to impact the Gross Value Added and employment. The construction sector
is driven by infrastructure projects to a large extent and it is expected to be hit severely by the
current levels of uncertainty, dismal business, consumer sentiments, loss of income as well as the
diversion of government funds towards management of the pandemic, it said.

Construction-related GVA (Gross Value Added) and employment are expected to reduce between
15 to 34 percent and 11 to 25 percent, respectively, when compared to pre-crisis projections for
FY21(Fiscal year 2021). In the construction industry alone, migrant workers comprise a large part
of the workforce and typically stay in labour colonies at construction sites. As per CREDAI
(Confederation of Real Estate Developers Association of India), prior to the lockdown, there were
around 20,000 ongoing projects across the country.
The work was being undertaken in as many as 18,000 sites and more than 30 percent of workers
were staying away from sites due to the fear of coronavirus infection, estimated workforce of 8.5
million people. The latter are employed across multiple sectors as per the Centre’s submission to
petitions in the Supreme Court.

KPMG in India also conducted a survey to assess the cost impact of the ongoing COVID-19
pandemic on construction projects, considering essential aspects, such as manpower, plant and
machinery, and material and their net impact on overall construction cost. More than 30
construction sector professionals took part in the survey that measured impact on different stages
of the project.
Major reasons for the decline

1. JobSecurity
Due to instability of job in the pandemic situation many potential homebuyers are
victim in the country.

2. Delay in supply
Due to the shortage of labour and reduced supply of the construction materials the timeline
of the project can be pushed further which may also lead to a reduced profit margin.

3. Remote working
Remote working has affected the demand as well as salesin the commercial real estate
sector. Most of the businesses are incorporating a work from the home as an effort to
minimize social contact.

4. Retail closures
In the entire country, schools, colleges, entertainment venues, malls & real estate are
closed down as they can lead to majorly affect the spread of COVID-19.

Overall, at this time in the real estate sector, the future prospect is very uncertain. Niranjan
Hiranandani, the national president of NAREDCO, states that “Salvaging Indian realty, the
second-largest employment generator is critical, not only from the GDP growth perspective but
also for employment generation, since the sector has a multiplier effect on 250-plus allied
industries.” (Mishra. S, Oct 22, 2020)

Some Unique Sustainable Construction Materials

• Perlcon Colour Putty Colorputty is a unique formulation, which combines the

advantages of Perlcon’s special lightweight, feather smooth putty and paints to add
colour for the beautification of walls. Like Perlcon’sMaskaputty, Colorputty too is
easy to mix, spread and also gives 25% better coverage than ordinary putties.
 • Perlcon Sandfee Cement – Perlcon Sandfree Plaster is a unique cement-based
formulation developed specifically to overcome sand related problems like
availability, quality, labour and time.

• PERLCON’S: VERTIGRIP – Perlcon Vertigrip is an extra strength, sand-free, self-

curing, special tiling mortar for vertical surfaces.

So, what other options are open the Contractor to recover the costs and losses incurred
as a result of the problems of COVID-19 19?

Change in Law

Subject to the giving of Notice, the Contractor may be entitled to an extension of time and additional
cost if delay and cost are incurred as a result of a Change in Law or changes to the interpretation of such
laws. Under FIDIC, "Change in Law" is broadly defined and actions of the State Governments and
Union Territories to invoke Epidemic Diseases Act 1897, and other such Acts to issue
Regulations/Ordinances. (Sharma. A, Harman. M, Sep 02, 2020).

Delays caused by Authorities

Again, subject to giving a Notice, the Contractor may be entitled to an extension of time if it has
"diligently followed" procedures laid down by public authorities but those authorities delay or disrupt
the Contractor's work. (Sharma. A, Harman. M, Sep 02, 2020).

Delays by Employer

If, as is likely, the pandemic has prevented the Employer from giving access or possession to all or part
of the Site at any time, or has delayed approvals, release of design information or the provision of To
prevent such matters being breaches of contract, the Employer would be advised to claim Force Majeure
on the basis that the pandemic and its consequences are preventing him from performing his contractual
obligations. If the Employer has not done so, or has done so defectively or not in accordance with the
procedures of the Contract, the Contractor may wish to claim breach of contract and thereby recover its
costs. (Sharma. A, Harman. M, Sep 02, 2020).

There are a number of provisions in FIDIC style contracts which may be of relevance to matters which
have been impacted by COVID-19 19 and can give rise to additional cost and time.
 • A Variation to the Works necessary to accommodate changes required as a result of taking
account of the effect of the pandemic upon the Permanent Works or their means of delivery.

• A change to the relevant applicable technical standards, environmental laws, product standards
and so on specified by the Employer caused or required as a result of the pandemic may entitle
the Contractor to a Variation, with consequent time and Cost recovery.

• Potentially, changes required by the Employer to the Contractor's Health and Safety Procedures
under Clause 6.7 could be argued to require a Variation with the concomitant entitlements.
(Sharma. A, Harman. M, Sep 02, 2020).

Considerations Going Forward

Contractors need to be alert to ensuring that their rights under the Contract to protect themselves from
the dire impacts of COVID-19 19 and its consequences are maintained and implemented. They need to
consider carefully whether the events and the Employer's reaction to them provide an opportunity to
claim breach of contract or to seek a Variation.

Contractors will be advised to ensure that all current and future contracts contain express provisions
dealing with the risk of COVID-19 19 and its consequences. In current negotiations Contractors should
also be seeking additional costs provisions,.As the construction sector opens up more there are likely to
be problems of reduced supply chain capacity due to insolvencies and general financial uncertainties;
the risk of these needs to be evaluated . There is much that all sides of the industry need to be doing to
ensure that the economic engine of construction continues to drive India's growth. (Sharma. A, Harman.
M, Sep 02, 2020).
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Conclusion:

To say that the companies engaged in the construction and engineering sector, would be affected due
to the current unprecedented situation would be an understatement. The various restrictions put in place
by the Governments to control the effects of the virus may trigger shortage of raw material and
manpower, disrupted supply chain, further creating handicaps in performing contractual obligations.
Some elements in construction and engineering are imported from countries, which may be more badly
affected, creating a domino effect on the entire sector.

However, one must safeguard against the inevitable by adopting corrective measures in time. The first
step is to evaluate the contract clause(s)to ascertain the extent of liabilities upon breach and the last step
is to proactively adopt all measures to mitigate the liability by timely invoking the correct legal
doctrine(s).

Reference:

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