India’s construction industry has been one of the most lucrative economic prospects in the country’s recent history, thanks to growing urbanisation and population growth. The construction industry in India has experienced substantial expansion in recent years, and it is likely to continue rising at double-digit rates in the foreseeable future. In this post, we’ll look at the numerous elements fueling this industry’s growth as well as the prospective opportunities for investors in this field.
An Overview of the Sector
Construction is seen as a promising early-stage industry. Since the last two decades, the industry has been steadily growing. With new projects on the horizon, there are plenty of prospects for businesses. In India, the construction sector directly or indirectly employs more than 40 million people, with more than half of its activity concentrated in North Indian states such as Punjab, Delhi NCR, Haryana, Uttar Pradesh and Rajasthan.
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Why the Indian Construction Industry is Thriving
The building industry in India is flourishing for a variety of reasons. Here are a few examples.
1) As more people migrate from rural to urban areas, the country is rapidly urbanising.
2) Because the government is working hard to make housing more affordable, developers will continue to have good possibilities.
3) Over the next decade, a big number of young people will enter the workforce, increasing demand for homes and other real estate products.
4) Since 2011, the economy has been increasing at a rate of roughly 7% per year, allowing businesses to invest in new buildings and infrastructure.
5) Inflation has been relatively stable in recent years. This makes it easier for firms to invest in capital projects such as buildings or equipment.
Demand of Construction materials in India:
Building materials have risen in price due to a lack of qualified workers, the need for faster construction times, and a growing demand for higher construction quality and durability. Modern technologies are being adopted for a variety of reasons, including the necessity to reduce construction costs in the face of rising salaries and the availability of a vast variety of building materials suitable for specific uses.
Construction and Building Materials used in India
To achieve the intended shell life and sustainability, the new age infrastructure incorporates a mix of novel design styles, powerful technology, and high-end and durable construction and building materials. The requirement for skyscrapers and other infrastructure projects to be created of the most appropriate materials has increased as the number of skyscrapers and infrastructure projects planned has increased. The Construction Materials & Technology Promotion Council (BMTPC) was established by the Indian government in 1990 to encourage and promote the use of sustainable, energy-efficient, and environmentally friendly building materials. The following are some of the most regularly used construction and building materials in India:
Metal
Aluminum and steel alloys are used extensively in the building sector around the world, and they serve as the framework for large projects. New prospects for the metal industry will arise as infrastructure industries such as roads, trains, and power increase. Steel’s future prospects will be influenced by rising vehicle manufacturing, construction activity, and the availability of renewable energy materials. Steel is used extensively in the automobile and construction industries. Both of these businesses have benefited from the government’s recent attempt to lower automotive tariffs, which has resulted in increasing demand for steel sheets and plates from auto component producers.
Cement
Cement is a binder that is used in almost all types of construction in India. It provides a high level of construction resistance and overall building integrity. Cement is an essential building material in India, used to construct houses, flats, offices, and roadways. Cement is also one of the most widely used building materials in India, accounting for approximately a quarter of all exports. With so much money on the line, it’s no surprise that India’s Cement Industry is so large. Cement accounts for over a quarter of national industrial output and employs more than 10% of the workforce in the industry.
Bricks and Blocks
Bricks, which are made of clay or mud, come in a variety of shapes and have high structural strength. They’ve been used to build homes and workplaces all over India for a long time. According to statistics, India’s bricks and blocks business is quickly expanding due to rising awareness of energy efficiency in the residential sector. Business growth will be fueled by increased building material usage by industry and infrastructure projects, in addition to Energy Efficiency standards. Demand for building items is also being driven by the adoption of technology advancements. It is expected to reach US$ 522 million in value by 2021, up from US$ 386 million in 2016, with a CAGR of 4.6 percent between 2016 and 2021.
Fly Ash Bricks
Fly Ash Bricks are a type of building material manufactured from fly ash and water. Fly ash is a byproduct of coal-fired power stations that is commonly used as a concrete additive to replace some of the Portland cement. In India, fly ash bricks are extensively utilized in the construction of low-rise buildings. Fly ash bricks have grown in popularity as a result of their broad use in various sections of the country. Thermal power facilities produce fly ash as a by-product. It’s a component in the production of bricks, blocks, and tiles. Fly ash bricks are increasingly being utilized in India to construct homes and commercial structures. Aside from being affordable, these are also eco-friendly materials that don’t pollute the environment. Contaminate water bodies by releasing chemicals or adding contaminants.
Ready Mix Concrete:
RMC demand in the retail segment is also expected to grow, given the increased construction of residential and commercial real estate projects. In the case of doors and windows, sliding & casement applications will continue to dominate the overall demand, given their superiority in terms of aesthetics, quality and functionality. Glazed Vitrified Tiles (GVT) are estimated to grow more in demand, due to their features like customizability and varied design options. The increasing cost of input materials is still impacting the overall demand and cash flow, the industry remains hopeful that the scenario will change and the coming year will see the prices and the situation stabilizing.
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Concrete
Concrete, as in cement brings in the same set of advantages and disadvantages. They are long lasting building materials and have become the foundation for India’s bridges, highways, reservoirs, dams, parking structures, and everything big. Concrete is a construction material globally, cement is one of the most consumed materials, behind water and sand. It is used more than any other man-made material. Cement has been used since ancient times. The earliest known use is from 6500 BC (plaster floors found in modern-day Syria). In addition to common concrete, there are several types of specialized concrete that are designed for specific applications or uses: The world’s largest producer and consumer of cement is China.
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Ferro cement Wall Panels
Indian fibrocement wall panels market was valued at $118 million in 2015. The market is forecast to grow at a CAGR of 15.1% to reach $189 million by 2021. Rising demand for ferrocement wall panels for construction purposes and increasing installation are estimated to drive growth of Indian ferrocement wall panels market during 2016–2021 period. High cost of brick-and-mortar walls and fire safety issues, which can be overcome using ferrocement walls, is expected to fuel growth of Indian ferrocement wall panels market over next five years. Government initiatives towards low-cost housing schemes will also spur demand for these products during forecast period.
Clay Bricks – The Most Superior Building Material
Clay bricks are, first of all, ideal for the tropical climate like India. Consequently, it has also been the oldest known building material for its utility and high sustainability. What’s more important is that clay brick is the healthiest and greenest of all the alternative solutions. Sourcing of clay is the least devastating on the environment and it can even be recycled into the process. Still a dominant product segment with around 85% share of total production. Brick consumption in India is projected to grow at 7-8% CAGR during 2015-2021, reaching nearly 29 million cubic meters by 2021. This growth will primarily be driven by increasing urbanization and rising disposable income levels, coupled with government initiatives aimed at improving housing conditions across cities.
Building a Sustainable Future:
In India, the Construction industry sector is divided into two categories: real estate and urban development. Residential, office, retail, hotels, and leisure parks are all included in the Real Estate section. Water supply, sanitation, urban transportation, and are all Healthcare sub-segments of the urban development segment. Between April 2000 and September 2021, FDI in the construction development sector (townships, housing, built-up infrastructure, and construction development projects) and construction (infrastructure) activities totaled $26.16 billion and $25.95 billion, respectively.
Support for Policy – The National Bank for Financing Infrastructure and Development (NaBFID) was established in March 2021 by a bill enacted by the Indian Parliament.
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Infrastructure activities received 13 percent of the overall FDI inflows of US$ 81.72 billion in FY21.
In completed projects for operations and management of townships, malls/shopping complexes, and business constructions, 100 percent foreign direct investment in the construction industry in India is permitted under the automatic method.
Under the automatic method, 100 percent foreign direct investment in urban facilities such as transportation, water supply, sewerage, and sewage treatment is permitted townships.
For further details, please refer FDI Policy
Industry Scenario
- Cities Driving Growth – Urban population to contribute 75% of GDP (up from 63%) by 2025, and 68 cities would have populations of more than 1 million, up from 42 today
- The construction industry market in India works across 250 sub-sectors with cross-sector linkages.
- India’s real estate industry is expected to reach $1 trillion by 2030, contributing 13% to the country’s GDP.
- Under the NIP, India has a $1.4 trillion infrastructure investment budget, with 24% going to renewable energy, 19% to roads and highways, 16% to urban infrastructure, and 13% to railways.
- Programs such as the innovative Smart City Mission (which aims to improve the quality of life in 100 cities) are projected to increase quality of life through modernization and technology urban planning with a purpose.
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Business opportunities in the Indian Construction Industry
With roughly a million registered organizations, the Indian construction industry is one of the world’s largest marketplaces. lucrative business opportunities is booming, and it provides investors and aspiring entrepreneurs some profitable business prospects. The following section delves into some of these possibilities. According to studies conducted by the Indian Institute of Management Bangalore (IIMB), infrastructure may be constructed in three key segments: urbanisation, transportation, and energy. It goes on to say that, while existing government bodies such as the Housing & Urban Development Corporation Limited (HUDCO) have taken care of urbanisation, the transportation and energy sectors both have a lot of room for private investment, especially in areas like building railroads and providing electricity to remote areas where power grids aren’t available.
GROWTH DRIVERS
Smart cities
Currently, there are 100 smart cities. The goal is to improve people’s quality of life by implementing modern, technology-driven urban planning.
Industrial corridors
Eleven industrial corridors are in the works.
Railway stations/ lines
600 stations are set to be renovated.
Mega ports
There are plans for 14 CEZs, six new ports, and three mega ports.
Increasing demand for commercial space
Construction of office buildings, hotels, retail stores, and entertainment facilities. In 2020, the net office space absorption in India’s top six cities was 31.9 million square feet.
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INDUSTRY TRENDS
Need for Affordable Housing
More than 40% of the Indian population is predicted to dwell in cities by 2030 (compared to 34% presently), resulting in a requirement for 25 million more affordable apartments.
Adoption of Green Building Solutions
Cities’ growth will increase energy demand for building power, making measures like the updated Energy Conservation Building Code (ECBC) critical. The new paradigm emphasizes the use of green building materials as well as energy efficient HVAC and building materials
Technology/AI Shaping the Industry
Techniques including aluminum formwork, prefabricated buildings, and building information modelling (BIM) are being used to save money, speed up construction, and improve quality.
Some Useful Links:
Government Ministry/ Department
- Housing and Urban Development Corporation ltd.
- Department of Drinking Water and Sanitation
- Ministry of Housing and Urban Affairs
- Ministry of Rural Development
- National Building Construction Corporation (NBCC) Ltd.
INDUSTRY ASSOCIATION
- Building Material and Technology Promotion Council
- Confederation of Real Estate Developers Associations of India
- National Institute of Urban Affairs
- National Real Estate Development Council
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