© 2007 Further East Consult
About Further East Consult
Copyrights / Disclaimer / Privacy Policy
Malaysian Dutch Business Council.
Home / India / Industries

According to a study of PHDCCI India's construction industry will quadruple in size between 2006 and 2020 from 34.5 billion to 138 billion. Main targets of growth are the various infrastructure sectors like roads (required investment until 2015 27 billion), telecommunications networks (required investment until 2020 42 billion) and seaports (6.0 billion).

Several decades of semi-socialist government economy policy combined with the infamous "Hindu Growth Rate" has led to a severe shortage of building supply in almost every sector: factories, offices, hotels, condominiums, housing estates, shopping venues as well as an underdeveloped general infrastructure. Currently the market is experiencing an upswing but the increased activity cannot keep up with demand now that India's economy is rapidly expanding.

Economic expansion creates further urbanization and the Indian authorities estimate that by 2025 40% of the population on the subcontinent will live in urban area's. At the turn of the century this was 30% (i.e. 70% living in India's 550,000 villages) on a population of around 1.06 billion. Given the current Indian population growth rate the country will have approximately 1,4 billion inhabitants by 2025. This will mean an actual urban population growth of 75% over the coming years, from 320 million in 2006 to 560 million in 2025. This will further enormously increase the need for housing including amenities required for urban living.

India has been a relatively closed market for a long time and new technologies are constantly sought. Developments such as "green" technology are welcomed. However sometimes this is mere curiosity. As business people Indians are constantly searching for better ways to conduct their operations and new developments are of high interest. This does not mean that new technologies and products are easily accepted.

The construction market is for all products specification driven and new products need to prove themselves before they find ready acceptance. Since the Indian market has worked with materials that are perhaps somewhat outdated but familiar and trusted the willingness for change is not always an obvious one.

Building products e.g cement saw an increase in demand of up to 20% in 2005 vs. 2004. Steel is another commodity that will be in high demand over the coming years and new investments like those of Mittal Steel in new facilities (with a production capacity of up to 12 million ton per year) are welcomed.

The India construction market main activity zones :
1) Greater Delhi area, including bordering parts of Haryana and Uttar Pradesh
2) Gujarat
3) Maharashtra - mainly Mumbai and Pune
4) Karnataka - Bangalore
5) Tamil Nadu - Chennai
6) Andhra Pradesh : Hyderabad

These areas hold a combined population of over 55 million people. India's 2nd largest city in terms of population, Kolkata, has not seen the same major economic progress as the other Indian metropolises but now also there progress is being made.

In areas with major industrial expansion e.g Mumbai, Pune, Bangalore, Hyderabad there is a combined shortage of all types of builldings: factories, offices and hotels for immediate business expansion. A growing urban population following economic expansion is driving the need for more and better housing, shopping malls, infrastructure.

Short summary examples major developments :
- Expansion hotel room capacity 
  Current capacity : 
  Star category : 6,500 rooms => Expansion : +3,500
  Budget category : 7,000 rooms => Expansion : +5,500
  Immediate reason : Commonwealth Games 2010 
- New terminal buildings at Delhi's international airport Indira Gandhi
- Expansion of Delhi's new subway system
Gurgaon (Greater Delhi)
New satelite city complete with housing, offices, shopping malls.

Chandigarh (population 1,0 mln, 4 hours north of Delhi)
New "green" city area with all modern living amenities included. 

- New terminals at Hyderabad's NT Rama Rao International Airport
- New Biochemical industrial plants
- IT parks
- Outer Ring Road 
- Elevated expressway fom airport to city
- Two new townships
- Subway

Mumbai Ring Road maintaince and expansion

The Indian government is now actively engaging with private firms to develop these mega projects in order to keep financing in check and ensure a speedy completion.

The mid-term future in India offers all construction related products including house decoration materials an expanding market.