Construction industry

Being one of the most densely populated countries and a fast-growing developing economy, the construction industry in India has a very bright future. This industry in India consists of the Real estate as well as the Urban development segment.

The Real Estate SegmentThe Urban Development Segment
Residential SpaceWater Supply
Commercial & Office spaceSanitation
RetailUrban Transport
HotelSchools
HealthcareGovernment Institutes
Educational InstitutesHealthcare
Leisure ParksHousing scheme

The growth is 100% supported by the FDI under the automatic route. This route is applicable in completed projects for operations and management of townships, malls/shopping complexes, and business constructions including, urban infrastructures such as urban transport, water supply and sewerage and sewage treatment. 

According to experts, the Covid-19 pandemic in 2020 caused more trouble and disruption among all segments of the market than any other event in recent history. Extreme social and economic disruptions have led to severe repercussions in the lives of every human being. 

The construction and building material industry also hit a major roadblock with a shift in the availability and movement of resources, leaks in the supply chains, disruption in the cash flow, and distancing restrictions imposed due to the pandemic. However, the Indian Construction industry is expected to experience a growth of 11.6% in 2021. The sector gears up for a strong growth trajectory post the covid situation subsides. 

The construction segment is poised to be the third-largest in the world by 2025. So, now would be the time to invest carefully in long-term construction ventures as the sector prepares to resume a strong trajectory of growth once the current COVID crisis subsides. 

With the Indian government as of late boosting the National Infrastructure Plan and reporting the Affordable Rental Housing Complex (ARHC) scheme alongside different interests in the industrial sector reestablished push towards ‘Atmanirbhar Bharat’, the estimate for 2021 hence opens up energizing ventures. 

The growth of the industry will likewise be upheld by the public authority’s arrangement to fundamentally expand the supply of reasonable housing units under the ‘Lodging for All’ program by the year 2022. Conjecture period development will likewise be upheld by the public authority’s arrangement to finish the development of 23 new interstate and turnpike projects by FY 2024/2025, with expected speculation of INR3.3 trillion (US$46 billion) throughout the following five years.

Cost rationalization has picked up forcing construction companies to focus and prioritise modular designs and functionalities. 

The advantages for the consumers are evident – processing modular development will mean more tight management and power over deviations, bringing about the unrivalled nature of development at a lower cost. Furthermore, with material costs in motion and a work market that is proceeding to fix, the progress towards off-site, plant style creation, and development will be a rewarding route for the engineers and workers to reduce expenses, improve profitability and abbreviate their project timetables.

Sustainability is another aspect that will pick the high road for most of the customers. Environmental changes and pressure on the planet have enabled people to improve their knowledge about preservation through various means and by adopting a sustainable lifestyle. The construction business has also been struck with this change wherein the customers prefer sustainable projects right from the construction stage until the final execution stage. These projects may be of the kind that has adopted the usage of solar energy, using IoT lighting avoiding the usage of wires and managing controlling lighting directly from the cloud, using smart gas and water connections that minimize wastage. 

The vigorous GDP development rate experienced by the country over the most recent couple of years before the virus struck, alongside the public authority’s obligation to make higher ventures towards setting up elite infrastructure, is a welcome encouraging sign for development organizations.

THE CONSTRUCTION SECTOR LANDSCAPE

 

The Real Estate Landscape 

The real estate sector holds considerable significance in the Indian economy as it contributes about 6-8% to the Indian gross domestic product (GDP) and is expected to contribute about 13% by 2025. By 2030, the Indian real estate industry is expected to touch USD 1 trillion, becoming the third-largest globally. It is also the third-largest employer (after agriculture and manufacturing) in the country and presently employs over 50 million people. 

 

Social Infrastructure Landscape 

The Social infrastructure sector in India includes health and education infrastructure. Expenditure of approximately USD 28 bn and USD 20 bn for education and healthcare is planned respectively over 2020-25.

 

Public Space Development Landscape 

Public Space Development primarily caters to the general infrastructure improvements in a city. This can include market development, redevelopment of water bodies, development of recreational infrastructure or sporting infrastructure. A major focus area under the Government of India’s Smart Cities Mission, which aims to develop 100 smart cities, is the development of public spaces.

 

Residential Real Estate (excl. Affordable Housing) Landscape 

The residential real estate sector is a strong demand driver because of the large urban population and rising income of the middle-class in India. The government has also come up with the Housing for All Scheme. This sector caters to lower-class housing, with a target to construct 20 million affordable houses by 2022.

 

Commercial Real Estate Landscape 

India’s commercial real estate market is one of the most well-organised markets in the Asia-Pacific region with the introduction of Real Estate Investment Trust (REITs). The sector has been greatly boosted by government initiatives such as Make in India and other reforms such as the introduction of the Real Estate Regulatory Authority (RERA) and GST.

 

Industry Related Parks / Zones Landscape 

The industrial parks/zones are set up by the State Industrial Development Corporation or other government agencies / statutory authorities. These parks/zones are key manufacturing hubs for industry and can have specific sectoral segmentation depending on the type of the park. These parks usually have common infrastructure provided by the government.

 

EMERGING TRENDS WITH INVESTMENTS INTO THE BUILDING AND CONSTRUCTION SECTOR IN INDIA 

 

Slowing Home Prices

Between now and 2025, India will be part of a nation that will account for 72% of the expected construction activity across the world. This means better infrastructure and improved connectivity and thus a high standard of living. This also leads to bridging the gap between metro cities and their small-town counterparts. Global Construction research also shows that by 2025 India will have 1.1 crore annual average house completions on an average. So real estate is set to develop at a global scale and prices in real estate also go through a high and low period.

 

Greater Concentration of Demand 

Jobs have a direct correlation with the growth of the Indian economy and changing demographics. Today’s home seekers, be it for buying or renting, don’t mind relocating to new cities if the prospects regarding employment opportunities are engaging. So the trend seen is the spread of opportunities to Tier1, Tier2 and rural sectors as well.

 

Smaller Risks in Smaller Markets 

Investors will want to avoid the credit risks you run at the lower end of the investment price range, physical location is even more important, and you cannot count on rising prices to flesh out your expected return – you must drive a hard bargain. Research shows that fast-growing cities will drive high-risk high rewards in emerging economies.

 

The rise in Demand for Emerging Micro-Markets 

Micro markets like Bhiwadi in NCR, Halol in Gujarat, Jamshedpur, Jaipur, Jodhpur, Sohna in Gurgaon, Airoli in Navi Mumbai, Pirangut in Pune and Madhapur in Hyderabad witnessed huge demand for residential homes. Real-estate experts predict that coming years will be the years of emerging micro-markets, with huge demand for quality residential homes as industry and economic opportunities grow in these micro-markets.

 

Innovations offered by Builders 

The last few years have seen innovations in the real-estate sector, like builders, have strived to innovate by offering homebuyers theme-based projects like – comfort homes, senior homes, kid-centric homes, and more. Buyers can choose from several themes that are a perfect match for their lifestyles. Additionally, amenities that enhance the value proposition of the offerings, like smart lighting, 24×7 CCTV surveillance, power back-up, clubhouses, swimming pools, outdoor parks etc. which were considered a luxury a few years back, have become mainstream now.

 

BUDGET 2021 HIGHLIGHTS 

 

● Tax incentives for Affordable Housing and Affordable Rental Housing Project  

  1. To incentivize the purchase of an affordable house, it is proposed to extend the eligibility period for a claim of the additional deduction for the interest of ` 1.5 lakh paid for a loan taken for the purchase of an affordable house.
  2. To increase the supply of affordable houses, it is proposed to extend the eligibility period for claiming tax holidays for an affordable housing project by one more year to 31st March 2022. 
  3. To promote the supply of Affordable Rental Housing for the migrant workers, it is also proposed to allow a new tax exemption for the notified Affordable Rental Housing Projects.  
  4.  

●  The Union Housing and Urban Affairs Ministry was allocated Rs 54,581 crore for the next fiscal year.

  1. The Swachh Bharat Mission-Urban, a flagship programme of the Modi government, has been given Rs 2,300 crore. 
    1. The Smart Cities Mission, another flagship programme, has been given Rs 6,450 crore. 
    1. The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme, which aims at ensuring robust sewage networks, water supply, and other infrastructure to improve the quality of life in urban areas, has been allocated Rs 7,300 crore. 
    1. The government has allocated 23,500 crores for the projects related to Mass Rapid Transit System (MRTS) and Metro services in the country. 
    1. The National Capital Region Transport Corporation, which is executing the country’s first Regional Rapid Transit System (RRTS) project, has been allocated Rs 4,472 crore.

 

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