3.

INDUSTRY PROFILE

3.1 Introduction The Construction industry of India is an important indicator of the development as it creates investment opportunities across various related sectors. The construction industry has contributed an estimated 3, 84,282 crore to the national GDP in 2010-11 (a share of around 8%). The industry is fragmented, with a handful of major companies involved in the construction activities across all segments; medium sized companies specializing in niche activities; and small and medium contractors who work on the subcontractor basis and carry out the work in the field. The sector is labor- intensive and, including indirect jobs, provides employment to more than 35 million people.

3.2 History The period from 1950 to mid 60s witnessed the government playing an active role in the development of these services and most of construction activities during this period were carried out bystate owned enterprises and supported by government departments. In the first five-year plan, construction of civil works was allotted nearly 50 per cent of the total capital outlay. The first professional consultancy company, National Industrial Development

Corporation (NIDC), was set up in the public sector in 1954. Subsequently, many architectural, design engineering and construction companies were set up in the public sector (Indian Railways Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES), Engineers India Limited (EIL), etc.) and private sector (M N Dastur and Co., Hindustan Construction Company (HCC), Ansals, etc.). In India Construction has accounted for around 40 per cent of the development investment during the past 50 years. Around 16 per cent of the nation's working population depends on construction for its livelihood. The Indian construction industry employs over 3 crore people and creates assets worth over 20,000 crore.
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It contributes more than 5 per cent to the nation's GDP and 78 per cent to the gross capital formation. Total capital expenditure of state and central govt. will be touching 8, 02,087 crores in 2011-12 from 1, 43,587 crores (1999-2000). The share of the Indian construction sector In total gross capital formation (GCF) came down from 60 per cent in 1970-71 to 34 per cent in 1990-91. Thereafter, it increased to 48 per cent in 1993-94 and stood at 44 per cent in 1999-2000. In the 21 st century, there has been an increase in the share of the construction sector in GDP and capital formation. GDP from Construction at factor cost (at current prices) increased to 1,74,571 crores (12.02% of the total GDP ) in 2004-05 from 1,16,238 crores (10.39% of the total GDP) in 2000-01. The main reason for this is the increasing emphasis on involving the private sector infrastructure development through public private partnerships and mechanisms like build operate

transfer (BOT), private sector investment has not reached the expected levels. The Indian construction industry comprises 200 firms in the corporate sector. In addition to these firms, there are about 1,20,000 class A contractors registered with various government construction bodies. There are thousands of small contractors, which compete for small jobs or work as sub-contractors of prime or other contractors. Total sales of construction industry have reached 42,885.38 crores in 2004 05 from 21,451.9 crores in 2000-01, almost 20% of which is a large contract for Benson & Hedges.

3.3 CONSTRUCTION INDUSTRY IN INDIA

Today, India is the second fastest growing economy in the world. The Indian construction industry is an integral part of the economy and a conduit for a substantial part of its development investment, is poised for growth on account of industrialization, urbanization, economic development and people's rising expectations for improved quality of living.

In India, construction is the second largest economic activity after agriculture. Construction accounts for nearly 65 per cent of the total investment in infrastructure and is expected to be the biggest beneficiary of the surge in infrastructure investment over the next five years. Investment in construction accounts for nearly 11 per cent of Indias Gross Domestic Product (GDP).
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239.68 billion is likely to be invested in the infrastructure sector over the next five to 10 years in power, roads, bridges, city infrastructure, ports, airports, telecommunications, which would provide a huge boost to the construction industry as a whole. Investment into this sector could go up to 93.36 billion by FY2010. With such bullish prospects in infrastructure, affiliated industries such as cement are on a high. Cement consumption, for the first time, is set to exceed the 150-million tonne mark. Reflecting the demand for the commodity, capacity utilisation rose to over 100 per cent to touch 102 per cent in January 2007 with despatches touching 14.10 million tonnes as against the production of 14 million tonnes. As opportunities in the sector continue to come to the fore, foreign direct investment has been moving upwards. The real estate and construction sectors received FDI of 216.53 million in the first half of the current fiscal year.

3.4 INDUSTRY SEGMENTS

REAL ESTATE

Residential (Housing & Development) Industrial (Industrial Parks, Factories, Plants, etc.) Corporate (Office, Research Centres) Commercial (Retail: Malls, Shops, Showrooms; Hotels; etc. )

INFRASTRUCTURE Roads Railways Urban infrastructure (improved housing, watersupply and sanitation, schools, universities, health and security, etc.) Ports Airports Power

Indian Real Estate Sector Real Estate is a 8 bn (by revenue) Industry in India. It is projected to grow to 34 bn by 2010. It has witnessed a revolution, driven by the booming economy, favourable demographics and liberalised foreign direct investment (FDI) regime. Growing at a scorching 30 per cent, it has emerged as one of the most appealing investment areas for domestic as well as foreign investors.

The second largest employing sector in India (including construction and facilities management), real estate is linked to about 250 ancillary industries like cement, brick and steel through backward and forward linkages. Consequently, a unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times.

INFRASTRUCTURE

Power

Power generation capacity of 122 GW; 590 bn units produced (1 unit =1kwh), Compound Annual Growth Rate of 4.6% over the last four years

India has the fifth largest electricity generation capacity in the world

Roads An extensive road network of 3.3 m km the second largest in the world The Golden Quadrilateral (GQ-5846 km of 4 lane highways) North-South & East West Corridors (NSEW-7300 km of 4 lane highways)

Railways

The premier transport organisation of the country - the largest rail network in Asia and the worlds second largest

7566 locomotives, 37,840 Coaching vehicles, 222,147 Freight wagons, 6853 Stations, 300 Yards, 2300 Goodsheds, 700 Repair shops, 1.54 m Work force

Ports

12 Major Ports and 185 Minor Ports along 7,517 km long Indian coastline 100% FDI under the automatic route is permitted for port development projects PublicPrivate partnership is seen by the Government as the key to improve Major and Minor ports

Airports

India has 125 airports; of these, 11 are designated international airports 100% FDI is permissible for existing airports; FIPB approval required for FDI beyond 74%

Privatization of the Delhi and Mumbai airports is in progress. Expected investment of about 2.4 billion

New international airports - Bangalore & Hyderabad are being built by private consortia total investment of about 411 million

25 other city airports are being considered for private investment.

Urban Development Indias total urban population on 1st March 2007 was 285 million. Allowing up to 100 % foreign direct investment (FDI) under the automatic route in townships, housing, built-up infrastructure and construction-development project

3.5 CONCLUSION

With the economy surging ahead, the demand for all segments of the real estate sector is likely to continue to grow. The Indian real estate industry is likely to grow from 7 billion in 2005 to 58 billion in by 2015.

Given the boom in residential housing, IT, ITeS, organised retail and hospitality industries, this industry is likely to see increased investment activity. Foreign direct investment alone might see a close to six-fold jump to 19 billion over the next 10 years.

There are a lot of opportunities that are sprouting up in the construction of Roads, Railways, Airports and Power. Projects worth 1.872 billion are coming up to develop Special Economic Zones.

India has a large and growing middle class population of 300 million people, out of which a large section is need on new houses. It is estimated that there is a national housing storage of 41 million units. Retailing is becoming the boom industry with organized retail being a market of 4.494 billion. Water supply and sanitation projects alone offer scope for annual investment of 4.27 billion. The Ministry of Power has formulated a blueprint to provide reliable, affordable and quality power to all users by 2012. This calls for an investment of 54.67 billion in the next five years.

The government of India has permitted FDI up to 100% for development of integrated townships in India last year.

India's booming infrastructure sector is fuelling demand for all kinds of construction equipment. Before the opening up of the Indian economy, and the entry of international majors, much of infrastructure development and construction in the real estate sector

REFERENCE