Chennai
The repercussions of the year-long power crisis have made their presence felt now more than ever before, on the real estate industry in the city. However, the fallout of this could well have an impact on budgets, even as developers grapple with the use of alternate power source.
That the State has begun to bear the brunt of an acute power shortage is by now, an understatement. For the last year, Tamil Nadu has seen its share of an acute energy crisis, which has inadvertently – and predictably – transpired into inconvenient power-cuts. One of the industries that have been affected by this to a large extent is real estate. Not only have the hour-long power-cuts (two-hour-long power outages since March) affected productivity, but have also resulted in an unavoidable reliance on diesel generators (DG).
“We can’t risk compromising on productivity and that is why we heavily rely on diesel generators for the two hours every day when we have no power,” says R Kumar, Managing Director, Navin Builders, “While this has definitely help us cope with the power outage, there’s no denying that spend a lot of money for the diesel, which has definitely reflected in our construction costs.” Of the eight projects that Navin Builders is currently working on, five major projects have made use of diesel-generated power to ensure that productivity isn’t affected. Not surprisingly, Kumar isn’t alone. Several builders in the city have begun to face a similar dilemma – that of rising construction costs, resulting from the energy crisis.
In the light of this, a few stringent measures, consultants believe, ought to be taken by developers to ensure that all is not lost in the mayhem. “Stocking up on diesel, and the construction of storage tanks is essential to ensure that you have enough fuel at your disposal,” says N Hariharan, Office Director, Cushman and Wakefield, “The problem arises when a fuel shortage occurs. For then, construction delays inadvertently take place and this could well reflect in pricing.” However, what developers fear most is a possible hike in diesel prices given the large demand that currently exists. “The government has to find a way to harness nuclear power or hydroelectric energy,” says Kumar, “There is an abudance of energy sources. All that’s left to do is find a way to harness them and make the best of their existence.”
If there’s anyone who would know a thing or two about harnessing energy from unconventional sources, it’s A J Balaji. The executive director – who also oversees facility management – at Olympia Tech Park, obtains a small percentage of the power required to run the IT complex through a wind farm located in South Tamil Nadu. However, even by his own admission, that is far from sufficient. “We face a two-hour power-cut everyday, we can’t draw power from the grid on Sundays and Tuesdays are power holidays. In addition to this, we aren’t allowed to draw power between 6pm and 10pm and our quota of 80 percent (of power sanctioned) has been reduced to merely 60 percent. We also need to shut down for eight hours every month for maintenance purposes,” he says. So not surprisingly, Olympia has had little choice but to rely – like most others – on diesel generators and power purchase. “This situation and the reliance on DGs has ensured that the cost that goes towards power supply exceeds Rs 1 crore, every month,” says Balaji. The irony here is the fact that such a situation should be faced by what is a certified green building. Quite rightly, Olympia has also taken upon itself, the responsibility of spreading awareness among its occupants on power-saving measures.
“Should this situation continue, prices will definitely go up and there are no two ways about that,” affirms Kumar, reflecting on the possible repercussions of the power outage from a consumer’s point of view. However, P Suresh of Arun Excello doesn’t quite agree. “Given the steep increase in the prices of steel (10 percent) and cement (7 percent) in the last year, this rise could well be negligible,” he says. Interestingly, Suresh says that power shortage is something that Arun Excello has been facing for a few years now, given that several of its projects are outside the city, where the situation has been bleak for a long while, now. “So we’ve become acclimatized to the situation,” he says.
The fallout of the situation is quite clear. Diesel generators and power purchases have – for most developers – meant a certain rise in construction cost. Whether this situation could go on to reflect in the prices, is anybody’s guess. However, as most developers feel, a sustained power crisis could well make its presence felt in the budgets of those looking to buy a new home. The time is right, perhaps, for the government – and developers – to look beyond conventional power sources and thus tide over what could well be a long affair.
Source: Jude Sannith S, Times Property, Times of India, Chennai
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