Modi's jobs promise hit by building downturn

A labourer working at the construction site of a residential complex in Noida, India. Indebted developers are cutting staff amid a slowdown. PHOTO: REUTERS

NOIDA (India) • After a decade labouring on building sites around New Delhi, Akhilesh Kumar lost his scaffolding job last month when his employer halted work on an array of 30 residential towers.

He joins more than half a million workers let go from sites around India's capital in the last 18 months - a stark sign that the ground reality in Asia's third-largest economy is far from as rosy as official data suggests.

The deepening downturn in India's crucial building sector makes it understandable why Prime Minister Narendra Modi's image as the country's economic saviour has lost its lustre.

"If I don't get another job, I have no choice but to go back to my village and work as a farm labourer," said Mr Kumar, who is in his 20s.

The decade-long construction boom in burgeoning cities like Noida, where Mr Kumar earned US$165 (S$231) a month, lured millions of labourers from India's rural hinterlands in search of a better life.

That process is now going into reverse, undermining Mr Modi's promise to create more employment for the one million Indians who join the workforce every month. Indebted developers are cutting staff as they slow work on existing projects, and postponing new buildings until they clear a backlog of 700,000 unsold homes.

A law to clamp down on "black money" flows that fund as much as a third of real estate deals is further squeezing demand. Across India, housing starts fell 40 per cent in the first half of the year, consultancy Knight Frank said.

"The slowdown in the construction sector is very, very depressing, and will have a negative impact on the overall GDP growth numbers in the first quarter of the current fiscal year," said chief economist Samantak Das of Knight Frank India.

The lack of jobs is already being felt in the poor northern state of Bihar, home of many of the labourers toiling near Delhi.

In Patna, the state capital, eight out of 20 labourers contacted by Reuters had, this year, made the 1,000km trip back from Delhi because they could not find work.

The squeeze comes at a bad time for Mr Modi. Bihar heads to the polls this year, in elections his Hindu nationalist party, Bharatiya Janata Party, must win to gain seats in the Upper House of Parliament, where he lacks a majority to pass economic reforms.

Economists say lower interest rates and a government splurge on infrastructure should eventually help revive construction, which contributes a tenth of Indian GDP. Mr Modi's party also wants to regulate property markets, and tie investor money to specific projects to stop developers diverting cash elsewhere.

The slowdown around Delhi, where unsold inventory is highest, shows no sign of abating, however.

Around the site where Mr Kumar worked, half-built high-rises now dot the skyline. Cranes and diggers stand idle. His former employer, The 3C Company, has also cut staff on the 3,000-unit Lotus Boulevard by more than half.

Real estate association CREDAI's Mr Rohit Raj Modi estimates construction in Noida employed more than a million labourers at its peak in 2013, at least double today's number.

Even when the market recovers, a shift to mechanisation on larger sites would limit demand for new workers. He said: "From a labour point of view, the peak is over."


A version of this article appeared in the print edition of The Straits Times on August 28, 2015, with the headline 'Modi's jobs promise hit by building downturn'. Print Edition | Subscribe