[UPDATE] Building contractors: ‘The poor man’ in the real estate industry

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The number of migrant construction workers who are work permit holders has shrunk by 16% to 311,000 in December 2020 from 370,100 in December 2019, according to the Department of Statistics (Photo: Samuel Isaac Chua/EdgeProp Singapore)

SINGAPORE (EDGEPROP) - The construction sector has borne the brunt of Covid-19. Since early last year, the sector has been hit by a double whammy of labour shortage and cost escalations. “I’ve been in the industry for 43 years; I’ve never had this problem before,” says Goh Yeow Lian, executive chairman and managing director of Singapore-listed construction company Wee Hur Holdings. “The construction sector is in deep water.” (See also: [UPDATE] Tackling challenges faced by Covid-hit construction sector)

Many construction projects face delays in completion by six to 12 months or even longer. “What contractors fear most is project delays,” says Goh. Delayed projects lead to higher costs as the contractor still needs to pay for the project staff and equipment rental, such as tower cranes, hired for the preliminary works such as demolition, site clearance or site survey. “We can’t stop work,” he adds. “We still have to pay the bond for foreign workers, and we are still bound by our contract to complete the work.”

The number of migrant workers in the construction, marine shipyard and process sectors who are work permit holders has shrunk by 16% to 311,000 in December 2020 from 370,100 in December 2019, according to the Ministry of Manpower. Some of the skilled migrant workers from China and Malaysia who had gone home to celebrate Chinese New Year did not return to Singapore, Goh laments. With the outbreak of the virus in India in March, some migrant workers who were worried about their families had decided to return home too.

As the rate of infections spiked in India earlier this year, Singapore issued a travel ban on those with recent travel history to India with effect from April 24. The ban included long-term passes, and was extended to Bangladesh, Nepal and Sri Lanka from May. The labour crunch in the construction sector worsened as a result. “This is one of the issues facing our construction sector — our dependence on a foreign workforce,” says Goh. “It will continue as we do not have our own local workforce. Those who wear ties don’t want to be construction workers.”

Labour cost has increased two- to threefold: “We used to pay $20 per hour, but now we have to pay as much as $50 to $60 per hour,” says Goh. Construction material costs have escalated as well, from concrete to copper. He points to the price of steel, which prior to Covid was hovering at $700 per tonne, and has since surged to $1,100 to $1,200 per tonne. “Because of inflation, the costs of all metals have gone up too,” he says.

From this month, workers from India will be brought in under a pilot programme where they will be tested at “onboarding facilities” at the source country, and when they arrive in Singapore, they will have to serve Stay Home Notice (SHN), and observe safe management measures (SMM) thereafter. With this latest process, employers will have to pay $2,000 to $3,000 more per worker in addition to quarantine costs, according to a CNA report on July 7.

Goh sees this pilot scheme as a positive sign. “The spike in the construction cost recently is mainly due to shortage of workers, a rise in some essential material prices, and compliance with SMM as a result of Covid-19,” adds Goh. “We believe the construction cost will taper down once the situation improves.”

While the government relief measures, such as the Job Support Scheme and Foreign Worker Levy rebates, helped ease some of the burden, the biggest challenge remains for the projects that were secured two to three years ago and for which work has yet to begin, says Goh. The main issue is costs, which are pegged to prices at that point in time, he explains. Since then, costs have escalated by at least 20% due to Covid. “Who is going to pay for all these additional costs?” he says. “It’s a very huge sum. This is an industry-wide problem; most contractors face this same issue.”

In Goh’s view, the contractor should not be the sole party bearing the additional financial burden. “Let’s hope the public and private-sector clients will share the financial burden,” he adds. “The contractor is the poor man in the [real estate] industry.”

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