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The Future of Construction Sector in India

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An analysis of various reports on the development and future of India’s second largest employer – the construction industry.

The construction sector in India, which employs more than 35 million people, is the second largest employer, next only to agriculture. Therefore, any improvements in the construction sector affect a number of associated industries such as cement, steel, technology, skill-enhancement, etc. As per the government reports, the sector is valued at over $126 billion. It also accounts for more than 60 per cent in total infrastructure investment. About half of the demand comes from the infrastructure sector, and the rest is driven by the real estate sector and other industrial activities.

India’s construction industry will continue to expand over the forecast period (2016–2020), with investments in residential, infrastructure and energy projects continuing to drive growth. Various government flagship programs – including 100 Smart Cities Mission, Housing for All, Atal Mission for Urban Rejuvenation and Transformation (AMRUT), Make in India and Power for All – will be the growth drivers. The industry’s output value in real terms is expected to rise at a compound annual growth rate (CAGR) of 5.65% over the forecast period; up from 2.95% during the review period (2011–2015). There are certain challenges associated with India’s construction industry outlook. Limited funding, slow policy reforms and a weak currency are factors that will continue to limit the growth potential during the early part of the forecast period. Due to industrialization, urbanization, a rise in disposable income and population growth the demand for construction services is set to rise. Government efforts to improve the country’s residential and transport infrastructure will also support growth; states the report by Reportbuyer, a leading industry intelligence solution that provides all market research reports.

Key trends and opportunities highlighted in the report by Reportbuyer are:

  • The construction industry will be supported by the government’s plan to transform urban India. Under the 100 Smart Cities Mission, the government aims to provide a more sustainable and clean environment by 2020. In total, INR480.0 billion (US$7.6 billion) has been allocated.
  • In a bid to rehabilitate the slums, provide housing at affordable prices and ensure good quality homes, the government is focusing on social housing development. It launched the Housing for All by 2022 program in 2015, under which it set a target to construct 20.0 million social housing units across the country by 2022.
  • To promote comprehensive urban development and support economic growth, the government introduced AMRUT in 2015 to transform the country’s urban areas. The program will be implemented in 500 towns and cities.
  • Demand for electricity is projected to increase over the forecast period, due to industrialization, urbanization, population growth and per capita energy consumption. To reduce the country’s reliance on imported energy, the government is developing its renewable energy infrastructure. It aims to generate 175GW of electricity through renewable sources by 2022.
  • To improve the country’s infrastructure, the government will offer more road infrastructure projects under the PPP model. According to the Ministry of Road Transport and Highways, the government plans to offer 100 highway construction projects to the private sector in 2016.

India offers massive opportunities in construction as per the report by dmg events India. It says, Indian construction sector will grow up to eight percent every year for the next decade. The report further says that total allocation for infrastructure projects is $45 billion. The Planning Commission of India has already pledged to invest around $1 trillion in the five-year plan (2012-2017). Indian Ministry of Roads and Transport outlined plans for $120bn worth of road-widening projects. There are also plans for $60bn to be invested in India’s ports by 2020. Unit sale of construction equipment in India is expected to grow to 82,000 by 2016. The construction equipment industry’s revenues are estimated to reach $22.7bn by 2020 from $5.1bn in 2012. In addition to reduced building costs, Indian government now has more money to spend, that it had allocated to oil.

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