Winds Of Change


Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world-class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. In 2018, India ranked 44th out of 167 countries in World Bank’s Logistics Performance Index (LPI) 2018. Foreign Direct Investment (FDI) received in Construction Development sector (townships, housing, built up infrastructure and construction development projects) from April 2000 to June 2018 stood at US$ 24.87 billion, according to the Department of Industrial Policy and Promotion (DIPP). The logistics sector in India is growing at a CAGR of 10.5 per cent annually and is expected to reach US$ 215 billion in 2020. India has a requirement of investment worth Rs 50 trillion (US$ 777.73 billion) in infrastructure by 2022 to have sustainable development in the country. India is witnessing significant interest from international investors in the infrastructure space. In June 2018, the Asian Infrastructure Investment Bank (AIIB) had announced US$ 200 million investment into the National Investment & Infrastructure Fund (NIIF). Private equity and venture capital (PE/VC) investments in the infrastructure sector reached US$ 1,827 million during January-November 2018Indian infrastructure sector witnessed 91 M&A deals worth US$ 5.4 billion in 2017.

Government Initiatives

The Government of India is expected to invest highly in the infrastructure sector, mainly highways, renewable energy and urban transport. The Government of India is taking every possible initiative to boost the infrastructure sector. Some of the steps taken in the recent past are being discussed hereafter.

Announcements in Union Budget 2018-19:

Massive push to the infrastructure sector by allocating Rs 5.97 lakh crore (US$ 92.22 billion) for the sector. Railways received the highest ever budgetary allocation of Rs 1.48 trillion (US$ 22.86 billion). Rs 16,000 crore (US$2.47 billion) towards Sahaj Bijli Har Ghar Yojana (Saubhagya) scheme. The scheme aims to achieve universal household electrification in the country. Rs 4,200 crore (US$ 648.75 billion) to increase capacity of Green Energy Corridor Project along with other wind and solar power projects. Allocation of Rs 10,000 crore (US$ 1.55 billion) to boost telecom infrastructure. A new committee to lay down standards for metro rail systems was approved in June 2018. As of August 2018, 22 metro rail projects are ongoing or are under construction. Rs 2.05 lakh crore (US$ 31.81 billion) will be invested in the smart cities mission. All 100 cities have been selected as of June 2018. The Government of India is working to ensure a good living habitat for the poor in the country and has launched new flagship urban mission, the Pradhan Mantri Awas Yojana (Urban). In May 2018, construction of additional 150,000 affordable houses was sanctioned under Pradhan Mantri Awas Yojana (PMAY), Urban.

Achievements

Following are the achievements of the government in the past four years: The total national highways length increased to 122,434 kms in FY18 from 92,851 kms in FY14. India’s rank jumped to 24 in 2018 from 137 in 2014 on World Bank’s Ease of doing business – “Getting Electricity” ranking. Energy deficit reduced to 0.7 per cent in FY18 from 4.2 per cent in FY14. Number of airports has increased to 102 in 2018. India’s national highway network is expected to cover 50,000 kilometres by 2019. National highway construction in India has increased by 20 per cent year-on-year in 2017-18. India and Japan have joined hands for infrastructure development in India’s north-eastern states and are also setting up an India-Japan Coordination Forum for Development of North East to undertake strategic infrastructure projects in the northeast. The pace of expansion in India’s construction industry slowed sharply in 2017, as investment growth was undermined by uncertainty stemming from a demonetization policy. The industry’s growth will pick up pace in 2018, however, in part supported by government plans to boost infrastructure spending. In real terms, the Indian construction industry’s output grew by an average annual growth of 3.3% during the review period (2013–2017). Industry growth over the forecast period (2018–2022), which is expected to average 4.74% a year, will be supported by public and private sector investment to improve the country’s transport, energy and education infrastructure, as well as spending on affordable homes to meet the rising demand for housing. Urbanization will continue to generate demand for residential and infrastructure development. Government investment in transport infrastructure, energy and residential projects under flagship programs such as the 100 Smart Cities Mission, Bharatmala scheme, Housing for All 2022, UDAN (Ude Desh ka Aam Nagrik) scheme and the Aayushman Bharat program is expected to drive the growth of the industry over the forecast period. There are, however, risks associated with this positive outlook. The country’s cumbersome bureaucracy and poor regulatory and legal framework continues to hold back investment growth and create a challenging business environment for investors. The real estate sector holds considerable significance in the Indian economy as it contributed about 6-7 percent to the Indian gross domestic product (GDP) in 2017 and is expected to contribute about 13 per cent by 2025. By 2030, the Indian real estate industry is expected to touch USD1 trillion, becoming the thirdlargest globally. It is also the third largest employer (after agriculture and manufacturing) in the country andpresently employs over 50 million people. As per the National Skill Development Council (NSDC), real estate and construction sector is expected to necessitate demand for over 66 million people by 2022, while KPMG in India forecasts this number to cross 75 million by 2022. The sector is estimated to grow to USD650 billion by 2025 and surpass USD850 billion by 2028. India has consistently improved its ranking on the globalreal estate in 2018 which has instilled confidence in investors. The value of investment grade real estate under construction increased from USD174 billion in Q42012 to USD243 billion in Q22018. Residential, commercial and retail are the three key asset classes, which have primarily been contributing to the sector’s growth.

Commercial segment, opportunities ahead

India’s commercial real estate market is one of the most well-organized markets in the Asia-Pacific region and the introduction of Real Estate Investment Trust (REITs) structure is expected to help the sector become even more efficient. Currently, the pan-India office vacancy rate stands at 14 per cent that is considered to be a natural vacancy rate. In 2018, the commercial marketssaw new completions at over 26 million sq ft and in 2019 this number is expected to reach 42 million sq ft. Commercial assets have been the most preferred assetclasses in real estate by investors over the last coupleof years. It has attracted about 80 per centof the totalinvestments between 2016 and YTD-2018.

Growing start-up ecosystem:

The start-up network is growing strongly with over 5,200 entities operating in the country. It is currently at the third position in terms of number of start-ups after China and the U.S. It is forecasted to reach 10,500 by 2020, growing two times. India is the youngest start-up country in the world,with 72 per cent founders under 35 years, hence, co-working facilities provide an excellentbusiness opportunity in commercial realty. Smallerorganizations have traditionally found it difficult tofind cost-effective offices. However, they now havethe option of having an economical office in a CentralBusiness District (CBD) location in tier I cities, forshort periods without associated costs such assecurity and utility costs. Attracting investor confidence with USD400 million in investments expected by 201815: Coworking facilities have the potential to deliver 30–40per cent gross margin for operators at 80 per centoccupancy, with a break-even period of approximatelysix to nine months. Hence, they have also beenattracting interest from global players over the past two to three years. Possible cost benefits compared to conventional offices: Economically, co-working spaces are amuch more viable option for start-ups and SMEs,given the cost advantage over the long run, ascompared to conventional leasing arrangement.– 5–15 per cent standard saving per seat comparedto standard lease– 50 per cent reduction in co-working cost per seatcompared to conventional leasing arrangement– 15–25 per cent savings on real estate and officemaintenance cost Focus from government: The government is supportive of the idea of co-working spaces, asevident from the announcement of India’s firstgovernment-owned co-working space for start-ups inMangalore, with a sustainable revenue model for thefacility designed to accommodate 100 people.

Emerging trends in the sector:

Augmented reality

Construction World says that although virtual reality has been an emerging trend over the past few years, it’s quickly growing outdated – especially when compared to augmented reality uses and benefits. This is the ability to visualize the real world through a camera lens. It’s something that’s bound to open many new opportunities for the construction industry even though it’ll come with a cost. For those companies who can afford to start using it now, it’ll revolutionize how they project and build things. This is a trend that will grow much bigger in the next few years. In fact, many people believe that instead of using safety goggles, we’ll start planning and plotting sites before we even break ground.

Construction software and data ecosystem

Real-time collaboration software is already regarded as an essential component of the entire building process. Nevertheless, its impact on the sector is expected to increase substantially in the near future. It goes without saying that data has played an integral role in this paradigm shift in construction. The emergence of a data ecosystem where all the innovative players of the industry will come together and share data, experience and project knowledge is closer than we might think. And it is no exaggeration to maintain that it’s the only way forward for construction. The ability to integrate your existing processes and systems into a single fully-connected platform can empower the way people in the industry work. A plethora of software solutions for different functions and disciplines in the course of a construction project can now effortlessly be combined in one place. The use of digital tools facilitates the accumulation of these valuable bits of information and by extension, the minimization of delays, reworks rates, and communication hiccups between the site and the office. In that sense, reliable real-time collaboration software is expected to function as the digital backbone for the construction process from start to finish.

Increased prefabrication, modularization, and eco-friendliness

There’s been a growing trend towards multi-trade prefabrication. This is something the Multi Trade Prefabrication Conference is now addressing. It was the first ever multi-trade conference that was held for the growing number of construction companies who are implementing prefabrication strategies. A great example of this occurred in Dubai where a 3D office building was printed in 17 days, followed by only two days spent on site assembling it. Many construction industry experts believe we’ll continue seeing this practice grow in the coming years, especially since cost and time are no longer as prohibitive. This doesn’t mean that they’re no longer issues, simply that they’re being addressed in ways that will help propel this industry forward.

Drones

Many construction sites are already heavily dependent on the use of drones. These drones are very beneficial in that they save a lot of time. For instance, surveyors can survey an entire site in just a few minutes, whereas in the past it’d take them several weeks or months. Obviously, this will also save construction companies a lot of money. As drone technology continues rapidly developing in its accuracy and precision of its readings, even less human involvement will be necessary. In the past, many companies were hesitant to use drones because they still needed a controller, but today as the technology grows much more efficient, more construction companies are willingly and openly embracing this technology.

Robotics

JB Knowledge says robotics is something that shouldn’t be overlooked. Industries like healthcare are already investing a lot of money in them. As these robots grow even more precise and accurate, they’ll become a commanding force in the construction industry. In the beginning, the cost of robotics will be high, but it will still be well worth it to at least pay attention to this technology. Eventually, we may witness robots being able to do things like lay bricks and tie rebar, we may even see them complete most of the current man-operated construction projects.

Cloud and mobile technology

Just a few years ago most people either didn’t know or couldn’t explain what a cloud operating system was. Today, this is no longer the case. In fact, most mobile devices can leverage cloud technology from anywhere, at any time. There are many great advantages to this, including storing almost limitless amounts of information that you can then share instantly with the touch of a button. This is much less expensive too – about one-tenth of what sharing old technologies cost. Since the cloud-based business phone system is accessible from anywhere you have an internet connection you can expect it to become a mandatory part of the construction industry in the future, especially if you want to remain competitive.

Advanced uses for GPS

Construction World says while GPS tracking solutions aren’t anything new, they’re now being used in more creative and resourceful ways including: Surveying has been dramatically improved because crews no longer need to use traditional surveying equipment. Data for prospective project sites can be quickly and accurately collected. Project managers are also using GPS in fleet management. Today, each of their vehicles is equipped with a device that is trackable via both computer and smartphones. This lets everyone know where vehicles always are. It’s easier to find lost or stolen equipment because managers can now generate maps that pinpoint the exact location of any of these items.