/ -- India's increasing population leads to increased commercial activities - both agricultural and industrial - increasing the need for water and leading to the depletion of surface and ground water. While water is used in the actual construction process, it is also embodied in the construction material. The total water embodied in typical Indian urban construction is about 27.6 kilolitres per square metre of built area. This also includes the water consumed during the actual construction process which is about 2 kilolitres per square metre.
"Building and managing efficient and sustainable water infrastructure should be given prime importance in the development plans of private developers and of the government while developers need to focus on adopting water saving construction practices," says Kaveri R Deshmukh, Senior Associate Director, Research, Colliers International India.
Higher Floor Surface Index (FSI) and growing need for water
Rules permitting a higher FSI lead in part to a rise in construction activities, pushed by the migration of people to cities, and leading to rise in water demand.
Due to the water crisis, developers are prompted to use innovative construction technologies so as to reduce the usage of water. They have started using self-curing concrete and plaster or gypsum plaster, an alternate material to cement and plaster which requires 50 per cent less water for mixing and no water for curing. Alternatively, they are also constructing storm water collection systems, rain water harvesting wells and water treatment plants to reuse water, as well as using rainwater harvesting to recharge ground water.
While Hyderabad started rainwater harvesting only in 2018, in Chennai the practice has been mandated for developers since 2003 to help mitigate water shortages. In Bengaluru, BWSSB rainwater harvesting regulations have made it mandatory for homes and commercial establishments to harvest rainwater since 2017.
The impact of water scarcity on real estate development includes:
Costs
The rise in cost of water is a result of demand for consumption by occupiers in residential and commercial buildings as well as for construction by developers.
Delays
The water shortfall not only delays developers' construction timelines, but also the possession date for occupiers, and is a major challenge in meeting development timelines.
Contemplated construction ban in Bengaluru would likely push residential market in sellers' favour
With Bengaluru facing a water crunch, the state government of Karnataka announced that it may consider imposing a temporary five-year ban on construction in the city. If this comes into effect, it would hit the residential market in Bengaluru, which only just started picking up in 2019 after four years of unsold inventories. Eventually, it may turn Bengaluru into a seller's market.
1. Office market may run short of supply
Given that Bengaluru has the highest office gross absorption rate (12.1 million sq ft till Sept. 2019) and is the largest office market in the country, prices of the units ready for occupation are likely to rise faster than those under construction while leasing rates would rise too.
2. Uncertainty blues for developers and end users
A lack of clarity on whether the proposed ban would apply to new projects or just those under construction also keeps developers and end users in a wait and watch mode as they may reconsider their prices and costs.
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About Colliers International Group Inc.
Colliers International (NASDAQ: CIGI) (TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning approximately 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management.
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