India Construction Industry: Current Status & Trend Analysis

May 17, 2023 - 00:00 Updated: Dec 19, 2024 - 14:50
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India Construction Industry: Current Status & Trend Analysis
Ujjwal Parwal
Director and Founder, RationalStat
                                                                                                                                                               

The Indian construction industry is expected to receive a significant boost in 2023 and account for 13% of India’s GDP. This will primarily be supported by a sharp increase in capital expenditure as part of the FY 23/24 Budget. In its latest budget, the government of India has increased its total expenditure by 7.5%, from an estimated expenditure of US$ 522 billion in the last year to US$ 561 billion in the current fiscal year.

 

Brief Overview of the India Construction Equipment Market

The global construction equipment market is estimated at US$ 192 billion in 2021 and is expected to grow at a strong CAGR of more than 5% during the forecast period, driven by growing sales in China, India, and Latin American economies.  Urbanization and road construction activities are undoubtedly playing a major role in the overall picture of the Indian construction equipment market. Moreover, volatility in the real estate and construction equipment market has resulted in demand-supply gaps that hamper the growth of the sector and its trends.

The global construction equipment market is facing regulatory pressure for introducing electric and hybrid construction vehicles over conventional ones.  Even though the cost of construction equipment and the heavy loans taken for the acquisition of the same still haunts most of the players in the construction market, renting and leasing of such equipment are slowly catching the eye of the market.

 

Construction Sector Trends in India in 2023

Emerging trends that have a direct impact on India’s construction industry include a rise in the need for green construction to reduce carbon footprint, B2B e-commerce platforms, bridge seismic devices to improve structure life, building information systems for efficient building management, and the use of cutting-edge technologies. With 10 million new homes required to be built every year to keep pace with housing demand in India, significant opportunities exist with regard to establishing new techniques in climate-responsive construction.

  • Inclusion of Robots in Construction Projects and Fields
  • Usage of Construction Apps to Maintain Productivity
  • Prevalence of Modular Design in the Construction Field – the market is worth more than US$ 100 billion in 2023
  • Consideration of Rented Construction Equipment
  • Green Buildings and Sustainable Construction Practices
  • Deployment of Building Information Systems (BIS)

 

Building Materials Market in India

The demand for construction materials to register a growth of nearly 8% during the upcoming years. In 2023, the building material market in India is estimated to touch US$ 240 Billion in terms of market size. Importantly, the building materials sector registered a growth of 10% in 2022. Building material segments – tiles, plastic pipes, read-mixed concrete, uPVC, wood panels – will grow considerably during 2023-2026, given various demand triggers including India’s urbanization drive, rebound in the real estate market, healthy outlook for hospitality and health care sectors, and rising discretionary spends.

Last year was the rebound for the building material industry. The thrust on infrastructure development coupled desire to own real-estate assets helped the India construction industry to drive the demand for construction materials. The building material market in India sprung back and touched pre-covid levels in the first quarter of 2023.

As we move toward 2024, the construction industry is showing no signs of slowing down rather it is heading toward significant growth. The growth of building material demand is very vital for the overall economy as it contributes nearly 9% to India’s GDP employing over 50 million people.

 

Major Drivers and Trends

Increased Government Support to Augment Road Construction: Road infrastructure in the form of a network of national highways, state highways, district roads, rural roads, and urban roads acts as a major mode of transportation and connectivity for the country’s diverse population of consumers and businesses.

  • There has been an increase in the construction of National Highways (NHs) and roads over time, with 10,457 km of roads constructed in FY22 as compared to 6,061 km in FY16.
  • In FY23 (until October 2022), 4,060 km of NHs and roads were constructed, which was around 91% of the achievement in the corresponding period of the previous financial year.
  • Total budgetary support for investment in the sector has been increasing rapidly in the last four years and stood at around INR 1.4 lakh crore during FY23.

Digital Transformation in India’s Construction Industry and B2B E-commerce Sector: In the coming years 2023-2026, India’s construction industry is expected to register a strong growth of 6.0% CAGR. Increased competition, growing demand from the real estate sector, and labor shortages have led to the need for digital transformation in construction. The construction industry is increasingly adopting a variety of new technologies, including virtual design and visualization. Virtual Reality (VR-based) home tours, cloud-based software, big data algorithms, and smart contracts make the real estate process more tech-savvy and lead to a seamless experience. According to the survey in 2021, 70% of construction companies in India are prioritizing digital transformation

FDI in the Construction Development Sector (townships, housing, built-up infrastructure, and construction development projects) and construction (infrastructure) activities stood at US$ 26.3 billion and US$ 29.2 billion, respectively, between April 2000 and December 2022.

Cement production (weight: 5.37%) increased by 4.6 % in January 2023 over January 2022. Its cumulative index increased by 10.0 % from April to January 2022-23 over the corresponding period of the previous year.

 

Tips for Sustainable and Right Material

  • Procurement at the Design Stage
  • Examine Materials Beyond their Buying Price
  • Establishing Contracts with Suppliers of Building Materials
  • Adoption of Technology
  • Use of Market Intelligence

 

Key Developments in India Construction Market

  • In April 2023, Mahindra Lifepace secured Malad West, a suburban Mumbai Society redevelopment deal worth INR 850 Crores.
  • In April 2023, Birla Estates acquired a prime land parcel in South Mumbai Malabar hill.
  • In April 2023, Alliance Group intended to spend INR 216 billion to build 36 million square feet of residential projects in Southern Market, Bengaluru.
  • In April 2023, Real estate developer M3M India is likely to invest INR 7,600 crore in about 10 under-construction projects in NCR, comprising 20 million square feet of space.
  • In April 2023, Leading cement maker UltraTech’s consolidated sales rose by 12.4% to 105.7 million tons (MT) in FY2022-23,
  • In February 2023, the government of India approved a plan to develop affordable rental housing complexes for urban migrants.
  • In February 2023, the Indian government announced a budget of INR 2.83 trillion for infrastructure development in the financial year 2022-23.
  • In January 2023, L&T Construction secured a contract worth INR 7.97 billion for the construction of a hospital in Mumbai.
  • In December 2022, Tata Projects won a contract worth INR 2,689 crore for the construction of a high-speed railway line in Maharashtra.
  • In December 2022, the Ministry of Road Transport and Highways announced a plan to construct 65,000 km of national highways by 2025.
  • In November 2022, Reliance Infrastructure won a contract worth INR 2,942 crore for the construction of an elevated road in Mumbai.
  • In November 2022, the government of India approved the construction of a new airport in Rajkot, Gujarat, at a cost of INR 1,400 crore.
  • In October 2022, the National Highways Authority of India (NHAI) awarded a contract worth INR 2,903 crore for the construction of a highway in Rajasthan.
  • In October 2022, the Indian Railways announced a plan to electrify all its broad gauge routes by 2024.
  • In September 2022, Shapoorji Pallonji won a contract worth INR 1,727 crore for the construction of a residential complex in Mumbai.
  • In September 2022, the Indian government announced a plan to develop 100 airports across the country by 2024.
  • In August 2022, the Mumbai Metropolitan Region Development Authority (MMRDA) awarded a contract worth INR 1,101 crore for the construction of a metro line.
  • In August 2022, Larsen & Toubro (L&T) won a contract worth INR 1,700 crore for the construction of a water supply project in Karnataka.
  • In July 2022, the Indian government approved a plan to develop a new port in Vadhavan, Maharashtra, at a cost of INR 65,544 crore.
  • In July 2022, the National Buildings Construction Corporation (NBCC) won a contract worth INR 1,476 crore for the construction of a residential complex in Mumbai.
  • In June 2022, the Indian government approved the construction of a new airport in Haryana’s Hisar district, at a cost of INR 1,405 crore.
  • In June 2022, the National Highways Authority of India (NHAI) awarded a contract worth INR 1,178 crore for the construction of a highway in Uttar Pradesh.
  • In May 2022, Reliance Infrastructure won a contract worth INR 2,798 crore for the construction of a metro line in Mumbai.

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