All You Need To Know About Indian Construction Industry

After agriculture, the construction industry is the second largest industry in India. The industry accounts for eight per cent of India's GDP as it is the largest direct and indirect creator of employment by hiring nearly 40 million people and creating more new jobs every year. 

The industry can be divided into three mega segments which are like the real estate sector — residential and commercial construction; infrastructure construction — includes roads, railways, airport, power, etc.; and industrial – which comprises refineries, textiles, pipelines, etc. The real estate construction plays a crucial role in making the industry booming and successful. But due to the prolonged slowdown in the real estate sector, the construction industry appears to be sluggish. The slowdown has also resulted in inventory overhang across India. 

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The construction activity involved in these three different segments is largely different. The construction of residential housing accounts for 75 per cent; constructing of roads, railways, airports and ports take up between 40 per cent and 60 per cent share. And for industrial projects, construction activity ranges between 15 per cent and 20 per cent.

Major hurdles in the sector

Another factor which ails the sector is the ongoing disputes, where parties fail to resolve these disputes expeditiously and effectively. It is estimated that approximately Rs 70,000 crore investment is tied up in arbitration.

Since the construction industry is the backbone of India, urgent and effective reforms are required. With respect to the pendency of disputes, 64 per cent of the total claims raised against government entities and public sector units (PSUs) are pending in arbitration and 11 per cent are still pending with the government units themselves. In India, the average duration for settlement of disputes is more than seven years. Therefore, the recovery of the construction industry is critical for inspiring and upholding the current rate of growth and economic activity.

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There are other several factors which disturb the growth of the construction industry. The lack of skilled workforce, shortage of construction sand, raw materials and political disturbances are the biggest roadblocks. The pace in which the industry currently functioning does not reflect what it has in store for the future. 

Major drivers  

The advancement of technology in the industry can increase the pace and potential and will act as a growth element. The onset of international infrastructure players into India is creating employment across the spectrum. The initiative by the government of India – Housing For All by 2022 will act as a major game-changer for the ailing industry. 

The constant and increased push to the affordable housing mission along with faster approvals and recent changes in the policy will push the construction activity. Similarly, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) will fast-track the infrastructure activity. 

The development of unused areas in a city, which is more popularly known as the township housing, will become one of the main sources of growth in the sector. The development of townships in the new corridors will take the sector to giddy heights.