Why India offers massive opportunities in construction

Nicole Dsouza |
May 26 , 2015

undefinedIndia will spend billions of dollars upgrading housing and infrastructure, according to a new report. It says that Indian construction sector will grow up to 8 per cent every year for the next decade.

Construction activity forms around 10 per cent of India’s GDP and gives employment to more than 30 million people in the country. It also accounts for more than 60 per cent in total infrastructure investment.

The report by dmg events India, prepared for The Big 5 Construct India 2015 says that total allocation for infrastructure projects is $45 billion. It quotes Vipin Sondhi, Managing Director at JCB India saying: “With the investment and thrust to infrastructure increasing to $15bn, budgetary outlay on roads and rails increasing to $3bn and $1.8bn, the industry is well poised for growth. As the economy picks up from 8 to 8.5 per cent in the coming year, I am confident that these reformatory initiatives will spur the much needed growth in the sector.”

The Planning Commission of India has already pledged to invest around $1 trillion in the five-year plan (2012-2017). Indian Ministry of Roads and Transport outlined plans for $120bn worth of road-widening projects. There are also plans for $60bn to be invested in India’s ports by 2020. 

Unit sale of construction equipment in India is expected to grow to 82,000 by 2016. The construction equipment industry's revenues are estimated to reach $22.7bn by 2020 from $5.1bn in 2012. In addition to reduced building costs, Indian government now has more money to spend, that it had allocated to oil.

The Government of India announced its “One Hundred Smart Cities” initiative in the Union Budget 2014-15.  The project involves development of satellite towns of larger cities by modernising the existing mid-sized cities in the country. Indian government has allocated $1.2bn in the current fiscal year for the project.

The report says list five main drivers of growth in India:

  1. India's GDP is currently $1.3 trillion, making it the 8th largest economy in the world.
  2. India's economy is predicted to grow by 10% per annum by 2020
  3. With a savings rate of 37%, India's domestic savings fuel most of its investment requirements
  4. India's wealthiest consumers (those earning $1m or more) will increase to 40 million by 2030
  5. Indian stock market has generated investment returns of over 15% per annum for the last 10 years and experts expect this rate to increase in the next decade

From a policy perspective, there has been a growing consensus that a private-public partnership (PPP) is required to remove difficulties concerning the development of infrastructure in the country.

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The Modi government has eased Foreign Direct Investment (FDI) rules for the construction sector in a move to attract more money into the country to build new hotels, housing and townships.

Under the new rules, foreign investment is now allowed in projects with a minimum built area of20, 000 square metres, down from a previous 50,000 threshold. The minimum capital investment by foreign companies has been halved to $5 million.

Previously, India allowed 100 per cent foreign direct investment in real estate development with strict conditions, including a lock-in period of three years during which the investment cannot be repatriated.

The third edition of The Big 5 Construct India is taking place from September 10-12, 2015 in Mumbai. The show is organised in association with the Federation of Indian Chambers Of Commerce and Industry and follows the same format as The Big 5 events in Dubai, Saudi Arabia, Kuwait and Indonesia.

Fast Facts

$1.3 trillion India’s current GDP

10% of India’s GDP is based on construction activity

7-8% construction industry growth in the next 10 years

$1 trillion – investment in infrastructure (2012-2017)

$ 650 billion – investment in urban infrastructure in the next 20 years

$ 250 billion- investment in the power sector (2015-2020)

Find out more about the opportunities in India HERE 

Find out more about The Big 5 Construct India show HERE

Download a FREE copy of the new report HERE