Elevators & Escalators

The government should provide a financial package that will support the businesses in terms of availability of liquidity and working capital, writes Amit Gossain.

There will be an impact on the elevator and escalator market as we are not sure whether the lockdown in India will continue for a longer duration both completely or partially in some areas which are red zones. The real estate projects are delayed as everything is shut down due to the pandemic. Construction work is on halt and will be delayed for months. After the upliftment of lockdown, developers will take time to resume the construction work as most of the labourers are in their hometown. The real estate market also will take time to come to terms with the new ways of working including social distancing, etc. However the pick up is likely to be quick ones things settle down.

While the government will focus on reviving real estate as it is a major employment generator in the country, liquidity might still be a challenge for a shorter period of time. The impact is not known because it depends on the time frame of the lockdown. Following a series of measures that were announced by FM recently, the end of Financial Year 2019-20 has effectively been pushed to June 30. Covid-19 has hit India during a period that coincides with the few months of diminished business activity in the real estate sector, which might work in favour of the real estate and help it to sail through the difficult phase.        

For us, KONE's ability to deliver has remained overall on a good level considering the demanding operating environment. However, we expect the slowdown to increasingly impact the timing of our project deliveries and pace of installation in many markets and thus our new equipment and modernization sales. We estimate that in 2020, our sales will decline or be stable at best at comparable exchange rates as compared to 2019. The rate of decline in sales will depend on the duration and severity of the government measures and the pace of recovery.    

While we have many residential, commercial and major projects underway, our priority right now is to ensure the health and wellbeing of our people and to ensure our customers are well served as elevators and escalators are emergency services. We need to ensure that the elevators are working in all hospitals, high rise buildings, etc. so that essentials are delivered to people quickly.

Elevators are now playing a bigger role than ever before.     

We are taking strong actions to manage the situation both at the local and global levels and following the instructions from the local governments and health authorities.   

The Challenges

The real challenge the industry is facing is the changed norms and the guidelines of the entire industry, the way industry will now have to operate in the future, like many other industries. This is due to the fact that the construction sector is one where daily wage earners are employed. According to the industry body, there are around 20,000 ongoing projects across the country, and construction work is being undertaken in around 18,000 of them. This involves a workforce of about 8.5 million in construction work alone.          

As many of construction workers are not very literate, developers are providing all the necessary support to workers, from undertaking precautionary measures such as avoiding group formation, providing sanitizers and face masks, and fumigating the site and labour camps, to providing medical assistance.         

From an Indian real estate perspective, Covid -19 has hit us when the natural demand for people buying homes was picking up and commercial properties started doing well. Thus, the elevator and escalator market was looking up for that reason but of course, with liquidity concerns, it was still a factor challenging it.  

During these difficult times, it is important that we retain our employees, we engage with them and keep them motivated. This is also an opportunity for us to think and plan as a country and do things differently. The country is already thinking of 'Make in India' in a bigger way now by being less dependent on other countries.

Steps Initiated to Overcome and Sustain Growth

To overcome and sustain growth, the government should introduce packages which are aimed at generating employment. Social protection through existing schemes for workers, including informal, casual, seasonal and migrant workers, and the self-employed, employment retention schemes, including short-time work arrangements / partial unemployment benefits and other time-bound support for enterprises, such as wage subsidies, time-bound financial / tax relief and income smoothing measures to support business continuity, especially MSMEs and the self-employed.               

At KONE India, nothing is more important to us than the health and safety of our colleagues, customers, and users. We are actively monitoring the coronavirus situation and taking all necessary precautions to ensure that we are delivering to our customers in their time of need, while also ensuring the well-being of our teams. We recognize the critical role we all are playing in delivering the uninterrupted services to our customers and users, either remotely from home or by visiting them, just like our Service Engineers who address elevator emergencies 24/7 ensuring many citizens of our country can smoothly move.  A seamless framework has been laid out to help employees adapt to work from home and enable them to utilize technology effectively.              

Some measures we are taking to tide over the slowdown include cutting down on travels, more virtual meetings, E-learning courses for technicians to keep them engaged, fumigation in offices, and increased interaction with customers, sub-contractors, colleagues using digital tools.

Policies & Reforms Expected

The efforts undertaken by the Government of India for announcing measures to mitigate the impact of the Corona virus are highly laudable. The pro-active and preventive measures will go a long way in combating the alarming situation created by Covid 19 and paving a way towards a safe and prosperous India.        

Having that said, the government should provide a financial package that will support the businesses in terms of availability of liquidity, working capital and to meet up the maintenance of employment in their respective businesses.More liquidity for the real estate sector is important as it will not only help real estate developers but scores of homebuyers who are awaiting completion of their homes. Liquidity will improve sentiment in the market with a regular supply of ready to move-in homes.           

Few bold government measures that could revive the real estate market including, tax rebate hike, personal tax relief, interest free loans or lesser interest on EMIs or interest wave off for some period of time for home buyers will bring the buyers back in the market. There can be some incentives for the builder community as well, mainly liquidity and interest free loans to run their businesses effectively.

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