Indian construction sector “faces 30% fall in investment”: KPMG

The coronavirus pandemic is set to cut investment in construction projects in India by between 13% and 30%, according to a report from accounting company KPMG.

Gross value added (GVA) could fall by up to 34%, and employment in the sector is expected to fall by up to 25%, KPMG said in its report, titled "Covid-19: Assessment of Economic Impact".

Elias George, a partner in KPMG India, said: "The construction sector has been critically affected by the onset of the Covid-19 pandemic. Once the projects resume post lockdown, it is important not just to navigate the recovery phase well, but also to ingrain resilience into all systems and processes, to confront similar disruptions better in future."

KPMG has published another report, "Reviving the Construction Sector post Covid-19" on how India’s construction industry should prioritise projects and increase its "resilience".

India’s construction sector employs around 50 million people, and about $780bn of infrastructure projects are underway, most of which have been affected by the Covid-19 outbreak.

The sector is expected to be hit by falls in business and consumer confidence, disrupted supply chains and the diversion of government funds towards healthcare management.

KPMG also foresees a rise in costs. A survey of 30 construction professionals found they expect the wages of skilled workers to rise by between 20% and 25%, and those for semi-skilled and unskilled workers to rise by 10% and 15%.

The firm also predicted that projects that have not yet begun would likely be delayed by between two and three months.

The report suggests that the Indian government can cushion the impact on construction by cutting interest rates and setting up an emergency fund to ensure the survival of projects that are nearing completion.

It adds that project delays should not be penalised, and payments withheld as retentions should be released to improve contractors’ cashflow.

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