The construction industry in India is the second largest employer and contributes more than 10% of India’s GDP. 50% of the demand for construction activity in India is for infrastructure, and the rest comes from industrial activities, residential and commercial development etc. The Indian construction industry is valued at over USD 126 Billion (117 Billion Euro).
The rapid growth of Indian cities opens huge opportunities for the construction industry. India has the second largest urban population in the world, and it contributes significantly to India’s GDP (accounting for 62 – 63% in 2009-10 and project to reach 70 – 75% by 2030). Between the census of 2001 and 2011 91 million people moved into India’s urban centers –a growth of around 32%. Recent estimates suggest that by 2030 nearly 590 Million people will live in Indian cities. While the population keeps swelling, the infrastructure is struggling to even meet the demands of the existing urban population. There is need for re-generation of urban areas in existing cities and the creation of new, inclusive Smart Cities to meet the demands of increasing population and migration from rural to urban areas. Future cities of India will require smart real estate and urban infrastructure. Over the next 20 years investments of USD 650 Billion are estimated in urban infrastructure.
In recent years private, investments stagnated due to the weak economic activity, sustained high interest rates and chronic problems in obtaining long-term loans and governmental approvals. The new government has started a number of initiatives to try to deal with the issues facing cities – among other things setting up Infrastructure Investment Trusts and lowering requirements for banks that finance infrastructure projects in order to solve these credit crunches. Efforts to speed up and digitize approval processes are also showing results. Also highly controversial easing of environmental regulations has been initiated and will be continued – although this is a major political issue
The Government of India is in the process of launching a new urban development mission. This will help develop 500 cities, which include cities with a population of more than 100,000 and some cities of religious and tourist importance. These cities will be supported and encouraged to harness private capital and expertise through Public Private Partnerships (PPPs), to holster their infrastructure and services in the next 10 years. To provide quality urban services on a sustainable basis in Indian cities, the need of the hour is that urban local bodies enter into partnership agreements with foreign players, either through joint ventures, private sector partners or through other models.
An investment of USD 1,000 Billion has been projected for the infrastructure sector by 2017, 40% of which is to be funded by the private sector. 45% of infrastructure investment will be funneled into construction activity and 20% set to modernize the construction industry.
The construction industry in India has seen sustained demand from the industrial and real estate sector. The Indian government has undertaken a number of measures to ease access to funding for the sector. It has permitted 100% foreign direct investment in the construction sector without prior Governmental approval in most cases. Therefore, it accounts for the second highest inflow of FDI after the services sector and employs more than 35 Million people. All agencies and state enterprises are obliged to announce tenders in the “Indian Trade Journal” and on their websites. There are numerous platforms where tenders are also published, such as http://www.tenders.gov.in/. An overview of PPP projects can be found under http://www.pppinindia.com/.
To read the latest news on Construction in India click Construction Newsletter