Real estate, with huge job potential, is going to be energized and gutted by technology
Did we just see the job potential of another sector go through the window? Not yet, but it should happen in the foreseeable future.
Given the high employment potential of the real estate sector, growth is essential to create jobs, even if they are not permanent. However, given the rate at which technology is replacing human labor in many areas, real estate and construction could not miss the trend, especially given the high land costs in urban areas.
Earlier this month, Larsen & Toubro (L&T) built a 12-storey house under PM Awas Yojana’s mass housing scheme in just over three months (96 days to be exact) in Navi Mumbai. The work was executed for Cidco, the Maharashtra government’s mass housing and satellite town developer. Ninety-six buildings were constructed by producing nearly 2,000 prefabricated elements of the superstructure and architectural finishes under factory-controlled conditions. This included mechanical, electrical and plumbing work on a built-up area of 64,000 feet.
In December 2020, L&T built its first two-storey house based on 3D technology in 106 hours at its factory in Kanchipuram, Tamil Nadu; and a few months ago delivered a seven-story flight control systems integration center for the Defense Research and Development Organization in 45 days.
While it will take time for such technology-driven construction projects to become mainstream in the real estate industry, the very fact that seven- and twelve-storey buildings can be constructed in two or three months implies that sooner later, these technologies will be widely adopted.
According to an advertisement published by L&T Construction today (July 29), the normal time needed to complete a floor is seven to 12 days (longer, in the case of most builders who use lower technology), but L&T has succeeded in reducing the cycle time to just three days. And its factory can produce one floor with eight apartments for mass housing in one day.
The rise of technology is a huge boon to mass housing (or housing in general), where one of the major cost elements – aside from land and materials – is funding. Delays increase costs as much as material inflation. Today, technology has shortened the working capital cycle by speeding up the construction process. Houses can now be substantially built on the inside large factories.
India is losing the battle to create more jobs in one of the sectors with the greatest potential. The only way to meet the challenges of greater automation in building and road construction is to accelerate reforms in the real estate sector, particularly land. If this happens, house prices, even in big cities, can crash, creating more jobs in the medium term in the event of a building boom.
During the Covid-19 pandemic, when migrant labor fled to rural homes, many construction projects suffered from the lack of skilled and semi-skilled labour. L&T has demonstrated that this shortage will no longer be able to paralyze or delay housing projects.
Technology doesn’t always destroy jobs; what it does is polarize skill requirements, with the demand for high skills driving up wages at the top, while low-end jobs proliferate at lower wages because technology now makes every job easier to do.
For example, once upon a time, we needed highly skilled carpenters to make our furniture. Today, much of the furniture is designed on computers and mass-produced in computer-controlled factories, where engineers and software developers rule the roost. On delivery, you only need people who can screw wooden and metal parts together to assemble furniture, a low-skilled requirement that can be learned in a matter of weeks. The furniture sector has been IKEA-ized just as the mobility sector has been Uber-ized.
Now, real estate will experience this same skill polarization, with only finishing work in homes requiring less skilled fitters and quality controllers. This basically means that job skills and wages will be lower at the mass end of real estate work.
Jobs may not become scarce, but their quality and income-generating potential will be affected.