The Indian real estate and construction sector with about 45 million people employed is the second largest employer after agriculture in India. Due to the growth of the corporate environment and the demand for office space as well as urban, semi-urban and rural accommodations there is a maximum rise in human resource requirement with an estimated need of another 32 million jobs in the next five years. The Government of India has introduced various schemes like “Housing for all by 2022” and “Affordable housing schemes” to further boost the sector, build more job opportunities and attract more investment. Besides, this growth was supported by the 12th Five-Year Plan 2012-2017, under which the Government invested significantly in infrastructure, industrial parks, residential buildings and road building.
The National Democratic Alliance (NDA) Government has come up with a new highways construction project with the ambitious target of laying roads of up to 41 km per day. The current rate of road construction has already risen to 22.5 km per day from 16.6 km per day in 2015-16. In FY16-17, about 8,231 km of roads has been laid, a growth of 36% from the previous financial year. To achieve this target the NDA Government has arranged a merger of all future road projects such as economic corridors, coastal and other roads to the already existing Bharatmala plan, which will link India’s vast west-to-east land border. Construction of roads needs modern machinery and equipment. To keep step with the rapid pace of laying up to 41 km per day, the whole project is reliant on investments. The total investment for the Bharatmala plan is estimated at $149 billion which is the largest ever amount for a government road construction scheme. The required investment is likely to drive the demand for construction equipment and experts in this segment are expecting robust growth for the construction equipment with projections to touch $5 billion in FY2020.
India’s first green road, the 135 km long Eastern Peripheral Expressway (EPE) will be completed by March 2018. The six-lane expressway will provide a bypass on the eastern side of Delhi reducing significant amount of vehicles in the Capital. Contactors of the project are now in process of mobilising their machinery. The arterial road project is being developed by National Highway Authority of India (NHAI) and the road will be lit completely by solar panels.
With India emerging as a preferred investment destination, global capital flow into the Indian real estate market increased by 40% between 2011 and 2016 and stood at $5.4 billion in the last year. In 2017 real estate companies and projects already attracted 19 new investments worth $3.41 billion by March. Due to numerous policies and initiated laws by the Government in the past year, such as GST (Goods and services Act), phasing out of the FIPB (Foreign Investment Promotion Board), introduction of REITs (Real Estate Investment Trust) and “Construction of 100 Smart Cities” foreign and domestic investor participation is set to increase further.
With the Government’s aim to provide ‘Housing for all’ by 2022 there is a clear focus on the affordable housing segment. In the Union Budget 2017, released on 1st Feb, the Central Government has made several initiatives to give the project a big push and attract more investors. By granting infrastructure status to the ‘Housing for all’, it will allow additional private players to participate and will provide better options for consumers allowing them to buy their first homes which will lead to higher consumption. This will, in turn, lead to growth in the affordable home loans business, where a lot of players have taken positions and new investors have emerged. The infrastructure status will improve resource allocation for affordable housing and will also boost the housing supply leading to reduction in the deficit of demands. The Union Budget also promoted Modi’s project of providing 20 million new houses across India by 2020.
The introduction and continuation of several promising initiatives in the Construction and Real Estate Sector has led to a major boost in the past years. An increasing number of foreign companies and players are expressing an interest in investing in the Construction Industry. Between 2000 and 2016, $33.6 billion FDI was received in construction development and construction activities. Due to projects like ‘Smart Cities’, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), ‘Housing for All’ and the Bharatmala plan, the Construction Sector has a prosperous outlook and will attract a lot more foreign investment in the coming years. The Indian economy will grow at 7.2% in this year and is forecasted to grow at the rate of 7.7% in 2018. To modernize its infrastructure the country is depending on inflows of foreign investment.
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