Real estate & Construction Industry Market Research in India

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  • 1. www.empulseglobal.com 1Market Research in India MARKET RESEARCH ON CONSTRUCTION INDUSTRY IN INDIA This chapter comprises of the following sections; 1. Introduction 2. Outlook of Construction Industry 3. Overview of the Construction Industry in India 4. SWOT Analysis on Construction Industries in India 5. Problems faced by Construction Industry 6. Leading Construction Companies in India 7. Conclusion Introduction The construction industry is the second largest industry of the country after agriculture accounting for 11 percent of India’s GDP. Indian construction industry employs 32 million people and its total market size is estimated at Rs. 2,48,000 crores (35,640 million €). The level of a country’s development is reflected by its infrastructure and the desperate need for infrastructure development has increased the demand of the construction industry in India. The activities of the construction industry include working on new structures as well as additions, alterations, and repairs to existing ones. Segmentation of Construction Industry in India o Residential, industrial, commercial, and other buildings. o Sewers, roads, highways, bridges, tunnels, and other projects. o Specialized activities such as carpentry, painting, plumbing, and electrical work. Outlook for Indian construction industry o Expected growth of wage and salary jobs in the construction industry will be about 15 percent through the year 2012.
  • 2. www.empulseglobal.com 2Market Research in India o The demand for residential construction is expected to continue to grow. o Construction of nursing homes, Old Age homes, and other extended care institutions also will increase due to aging population. o Employment in heavy and civil engineering construction is projected to increase due to increase in highway, bridge, and street construction. Overview of Construction Industry in India o India is the second fastest growing economy in the world. o Construction is the second largest economic activity after agriculture. o Construction accounts for nearly 65 per cent of the total investment in infrastructure. o Investment in construction accounts for nearly 11 per cent of India’s GDP. o €239.68 billion or Rs. 16,747.67 billion is likely to be invested in the infrastructure sector over the next 5 to 10 years. o Investment into this sector could go up to €93.36 billion or Rs. 6,521.06 billion by FY 2010. o The real estate and construction sectors received FDI of €216.53 million or Rs. 15.13 billion in the first half of the current fiscal year (2008). Indian Real Estate Sector o Real Estate is a €8 billion or Rs. 558.94 billion (by revenue) Industry in India. o It is projected to grow to €34 billion or Rs. 2,375.61 billion by 2010. o It is the second largest employing sector in India. o Real Estate is linked to about 250 ancillary industries like cement, brick and steel through backward and forward linkages. o There will be a demand for over 24.3 million new dwellings for self-living in urban India alone by 2015. o €16 billion or Rs. 1,118.06 billion investment will be required over the next five years in urban housing.
  • 3. www.empulseglobal.com 3Market Research in India Global Majors in India Due to significant investment opportunities emerging in this industry, a large number of international real estate players have entered the country. FDI inflows into this sector are estimated to be between €3 billion or Rs. 209.59 billion and €3.50 billion or Rs. 244.50 billion. o Jones Lang LaSalle (JLL), the world's leading integrated global real estate services and money management firm, plans to invest around €646 million or Rs. 45.13 billion. o DAMAC Properties would invest up to €2.9 billion or Rs. 202.67 billion. o Merrill Lynch & Co has bought 49 per cent equity in seven mid-income housing projects of India's largest real estate developer DLF in Chennai, Bangalore, Kochi and Indore for €243 million or Rs. 16.99 billion. o Rakindo Developers would invest well over €3 billion or Rs. 209.59 billion over the next five years. o Dubai-based Nakheel and Hines of the US have tied up with DLF to develop properties in India. o DLF has also formed a joint venture with Limitless Holding, a part of Dubai World, to develop a €9 billion or Rs. 630.24 billion township project in Karnataka. o Gulf Finance House (GFH) has decided to invest over € 1 billion or Rs. 70.01 billion in a greenfield site close to Navi Mumbai. Government Initiatives to help Indian construction industry o 100 per cent FDI has been allowed in realty projects through the automatic route. Opportunities in the Indian construction industry o The Indian real estate industry is likely to grow from €7 billion or Rs. 490.03 billion in 2005 to €58 billion or Rs. 4,060.24 billion in by 2015.
  • 4. www.empulseglobal.com 4Market Research in India 0 500 1000 1500 2000 2500 3000 3500 4000 4500 Year 2005 Year 2015 490.03 4,060.24 Amount in Rs. Billion Thismeans that the growthof IndianReal Estate Industrywill be more than8 times injust 10 years. o Foreign direct investment alone might see a close to six-fold jump to €19 billion or Rs. 1,329.96 billion over the next 10 years. SWOT Analysis on Construction Industries in India Strengths o Employment and training opportunities in the field of construction. o Private sector housing boom and commercial building demands Construction of the multi building projects on the feasible locations in the country. o Good structured national network facilitates the boom of construction industry. o Low cost well- educated and skilled labour force is now widely available across the country. o Sufficient availability of raw material and natural resources in the country is supportive for the industry.
  • 5. www.empulseglobal.com 5Market Research in India o Real estate development is on high and it is attracting the focus of the industry towards construction. Weakness o Distance between construction projects reduces business efficiency. o Training itself has become a challenge. o Changing skills requirements and an ageing workforce may emphasize the skills gap. o Improvement in long-term career prospects is highly required to encourage staff retention and new entrants. o External allocation of large contracts becomes difficult. o Lack of clearly defined processes and procedures for construction and its management. o Huge amount of money needs to be invested in this industry. Opportunities o Continuous private sector housing boom will create more construction opportunities. o Public sector projects through Public Private Partnerships will bring further opportunities. o Developing supply chain through involvement in large projects is likely to enhance the chances in construction. o Renewable energy projects will offer opportunities to develop skills and capacity in new markets. o More flexible training delivery techniques are now available. o Financial supports like loan and insurance and growth in income of people is in support of construction industry. Threats o Long term market instability and uncertainty may damage the opportunities and prevent the expansion of training and development facilities. o Current economic situation may have an adverse impact on construction industry.
  • 6. www.empulseglobal.com 6Market Research in India o Political and security conditions in the region and Late legislative enforcement measures are always threats to any industry in India. o Infrastructure safety is a challenging task in construction industry. o Lack of political willingness and support on promoting new strategies. o Natural abnormal casualties such as earth quake and floods are uncertain and can prevent the construction boom. o Inefficient accessibility in planning and concerning the infrastructure. o Competitors are emerging in the industry by leaps and bounds. Problems faced by construction industry o Construction industry suffers from capacity constraints. o Lack of trained manpower and managerial skills with performance much below international level. o The industry is starved of finance. o Small and medium contractors do not have the wherewithal to upgrade their capability. o Quality, safety, environment and social aspects are also not being addressed appropriately. Conclusions o In the years ahead, the construction industry in India has to overcome various challenges with respect to housing, environment, transportation, power or natural hazards. o Technocrats associated with the Indian construction industry need to employ innovative technologies and skilled project handling strategies to overcome these challenges. o The outstanding performance under demanding situations in the past will stand in good stead and give confidence to the Indian construction industry to bring about an overall development in the infrastructure of the nation. o Investment in the Infrastructure sector could go up to €93.36 billion or Rs. 6,521.06 billion by FY-2010 which in turn translates to a good potential for the Construction Industry.
  • 7. www.empulseglobal.com 7Market Research in India India is a country with a stable and growing economy, sound legal system and a very stable political government at the centre  Indian economy has been witnessing a phenomenal growth since the last decade. The country is still holding its ground in the midst of the current global financial crisis.  Despite the global slowdown, the Indian economy is estimated to have grown at close to 6.7 per cent in 2008-09.  A number of leading indicators, such as increase in hiring, freight movement at major ports and encouraging data from a number of key manufacturing segments, such as steel and cement, indicate that the downturn has bottomed out and highlight the Indian economy's resilience.  Investor sentiment in India has improved significantly in the first quarter of 2009, according to a survey conducted by Dutch financial services firm ING  India has a very sound legal system  India also has a very stable political government at the centre now Indian construction industry is large and booming  The construction industry is the second largest industry of the country after agriculture accounting for 11 percent of India’s GDP  Construction accounts for nearly 65 per cent of the total investment in infrastructure.  Due to significant investment opportunities emerging in this industry, a large number of international real estate players have entered the country.  FDI inflows into this sector are estimated to be between €3 billion or Rs. 209.59 billion and €3.50 billion or Rs. 244.50 billion.