GROWTH OF CEMENT INDUSTRY IN INDIA:

GROWTH DRIVERS IN CONSTRUCTION INDUSTRY

Growth in Infrastr!tr"
1. Approximately 10 lakh crores is to be spent in the next five years on infrastructure.
While 50% investments in infrastructure will be done by the government through cash
contracts the remaining will be either pure private investments or !!! pro"ects.
#. $n the total investment on $nfrastructure minimum %5 % is towards construction and
#0 % spend will be for moderni&ation of the construction industry.
Growth in #i$%in& s"!tor
1. $ndustrial sector sees a steady growth and contributes to the construction sector in
the non'residential segment.
#. $( growth would continue to create a demand for commercial facilities. )(!s and
)*+s are being built by real estate developers.
,. -ospitality and (ourism industry is driving the demand for hotels and resorts.
%. .etail growth on account of increasing consumer disposable incomes is driving the
demand for commercial area development on a large scale.
Growth in Hosin&
1. (he current trend in real estate market is that after making investments inland the
pro"ect construction is mainly retail financed.
#. (he real estate developers traditionally employed contractors for construction of
pro"ects. )everal large contractors are transitioning towards becoming real estate
developers as well.
INDUSTRY SEGMENTATION
/onstruction sector can be broadly classified into # sub'segments0
11 .eal estate 2.esidential /ommercial3/orporate $ndustrial and )pecial*conomic
+ones 2)*+s11
#1 $nfrastructure 2(ransportation 4rban development .uraldevelopment 4tilities1
In%ian R"a$ Estat" S"!tor
(he real estate and construction sectors are playing a crucial role in the development of
$ndias core infrastructure. (he real estate industries growth is depends on the
developments in the retail hospitality and entertainment 2hotelsresorts cinema
theatres1 hospitals schools and $( enabled services. $t has greater prominence in $ndia
with the liberali&ation of economy increase in business opportunities and labour
migration.
(he 5overnment of $ndia has allowed 67$ up to 100 percent in the automatic route in
townships housing built'up infrastructure and construction development pro"ects to
increase investment generate economic activity and create new employment
opportunities.(he 4nion 8udget #01#'1, shown more importance onaccelerating the
pace of investment in infrastructure as this is critical for sustain andaccelerating an
overall growth.
Ma'or (ro'"!ts in R"a$ "stat" s"!tor in In%ia
9 :umbai based Wadhwa 5roup to invest .s ;'10 billion to develop 1.<million s=. ft. of
office space in 8andra >urla /omplex :umbai. (hepro"ect will consist of two office
towers and is due to be completed by#01%.
9 8angalore'based *mbassy !roperty 7evelopments is in talks with globalfinancial
services group ?! :organ to raise .s. 500 crores for two pro"ects@ premium villa
pro"ect and a $('cum'residential development on 8ellary .oad.
9 >ochi'base Asten .ealtors has proposed to invest .s 1000 crore in the next three
years in various pro"ects in central >erala.
9 Avalon 5roup has made the initiative to start up .s #00 crore pro"ects named AAvalon
.egal /ourtA in 8hiwadi .a"asthan. (he pro"ect is being planned on tweleve'acre space
consisting of eight hundred housing units and is expected to be completed over the next
three years.
Dri)in& For!"s
9 5rowth in the economy.
9 $ndiaBs emergence as an attractive offshore destination and availability of pool of highly
skilled technicians and engineers.
9 7evelopments of large captive units of ma"or players include 5*!rudential -)8/
8ank of America )tandard /hartered and American*xpress.9 .ise in disposable
income and growing middle class increasing thedemand for =uality residential real
estate and real estate as an investment.
9 *ntry of professional players e=uipped with expertise in real estatedevelopment.9
.elaxation of legal rulings and processes by the governing bodiesencouraging
investments in real estate.
9 $mprovement in infrastructure facilities.
Th" Union #%&"t *+,-.,/ &i)" 0or" i01"ts to infrastr!tr" s"!tor
9 $nfrastructure 7ebt 6unds 2$761 to be encouraged.
9 $$6/C to offer credit enhancement. 9 $nfrastructure tax'free bond of 50000 crore in
#01,'1%.
9 8uild roads in Dorth *astern states and connect them to :yanmar with assistance
from W8 E A78.
9 .aising corpus of .ural $nfrastructure 7evelopment 6und 2.$761 to #0 000 crore and
5000 crore to DA8A.7 to finance construction forwarehousing.
9 Window to !anchayats to finance construction of go downs.
Roa%s @
9 ,000 kms of road pro"ects in 5u"arat :adhya !radesh :aharashtra.a"asthan and
4ttar !radesh will be awarded in the first six months of #01,'1%.
9 (arget of covering length of FF00 kms under Dational -ighway 7evelopment
!rogramme 2D-7!1 during 6G1,. Allocation of the .oad(ransport and -ighways
:inistry enhanced by 1%% to .s.#5,.< billion.
(orts
9 (wo new ma"or ports will be established in )agar West 8engal and inAndhra !radesh.
9 A new outer harbour to be developed in the HI/ port at (hoothukkudi(amil Dadu
through !!! at an estimated cost of J500 crore.
O11ortnit2 (i" .
($ann"% Infrastr!tr" In)"st0"nts
$ndias economy has been growing at a rapid pace and to maintain themomentum of its
growth the 5overnment has strengthened its focus oninfrastructure development in the
country. $t has increased its infrastructure spendas a percentage of the countrys 57!
from 5.15 % during the (enth 6ive Gear !lan2#00#'#00J1 to J.55 % during the *leventh
6ive Gear !lan 2#00J'#01#1. (his isexpected to increase to over ;.00 % during the
(welfth 6ive Gear !lan 2#01#'#01J1.(he 5overnment plans to double its investment in
infrastructure to $D. %0.; trillionduring the (welfth 6ive Gear !lan from $D. #0.5 trillion
during the *leventh 6iveGear !lan period as compared to planned infrastructure
investments of $D. F.Jtrillion during the (enth 6ive Gear !lan period. $t should however
be noted that actual investments during the (enth 6ive Gear !lan period had met the
target andthat of the *leventh !lan period may reali&e F0 % of the target.
(he telecom sector has been witnessing increasing investment over the past 10years.
7uring the (welfth !lan !eriod almost #5 % of investments are expected to be invested
in this sector. While the roads E bridges sector has remained flat 21J%1 as a percentage
of the overall pie the telecom sector is expected to witness a /A5. ofK10 % from #00#
to #01J. Another sector which has gained increasing prominence is the oil and gas
segment @ with the 5overnments spend on the sector expected to increase from ,.5 %
of its total infrastructure spend during the (enth plan to <.%% in the (welfth !lan. (he
!lanning commission has targeted an ambitious investment of .s. <5 lack crores for the
1#thfive year plan. (o achieve the target infrastructure investment has to be raised to
10% of 57! from current F%. (he average growth rate of $ndiaBs gross domestic
savings has been over ,0% in past %'5 years.
)ector wise $nvestment during 6ive Gear !lans @
Roa%s 3 Hi&hwa2s @
$ndia has the worldBs second ' largest road network comprising a total length of %.#
million km and accounting for FJ % passenger traffic. (otal investment in the (welfth
6ive Gear !lan is estimated to be ;1%5,< crores. (he Dational -ighway 7evelopment
!rogramme 2D-7!1 has planned a high expenditure. $t seeks toward #;000 km of
roads from 6G #011 to 6G #015 @ out of this J,00 km were awarded in 6G1#. 2!!!
mode1 (ill August #011 #%J !!! pro"ects were awarded under D-7!.
Rai$wa2s
$ndian .ailways network spans over <%000 route km making it the worldBs third largest
rail network in terms of si&e besides being the largest passenger carrier and the fourth @
largest rail freight carrier globally. $n the (welfth 6ive Gear !lan total investment is
estimated to be <%,,J; crores 2including :.()1. .ail pro"ects in $ndia have been
typically the domain of the public sector. -owever based on the success of !!! in
other infrastructure sectors the $ndian .ailways has begun to take steps to explore the
!!! route. :ass .apid (ransit )ystem 2:.()1 is expected to comprise ma"or portion
of total planned investments in coming years. 7uring the(welfth !lan period private
sector spending is expected in :.() systems in cities such as :umbai 8angalore
-yderabad and >olkata. (he $ndian .ailways is also expected to initiate !!! pro"ects to
maintain E develop railway stations. $t has identified ## stations across $ndia that will be
moderni&ed into world @ class facilities.
(orts
$ndia has 1, ma"or ports and around #00 non'ma"or ports accounting for ;5 %of the
countrys total trade in terms of volume and round J0 % in terms of value.7uring #00< @
11 cargo traffic at $ndian ports increased at a /A5. of J.;F % fromF.J million tons to
FF, million tons. $n the (welfth 6ive Gear !lan total investment isestimated to be
1;JJF1 crores. (he Dational :aritime 7evelopment !rogrammeseeks to add #,0
million tonnes per annum in capacity in 10 years. (o achieve thisthe :inistry of
)hipping 2:o)1 plans to award #% capacity expansion pro"ects atma"or ports. (hese
pro"ects include a mega container terminal at /hennai port and amechani&ed berth at
Hishakhapatnam. -owever the only pro"ect that has beenawarded so far is the
?awaharlal Dehru !ort (rust (erminal.
Air1orts
$ndia has a total of 1,< airports with ; owned by the Airport Authority of $ndia. 7uring
#00J@11 passenger and freight traffic at $ndian airports increased at a/A5. of 10.%% %
E 10.; % respectively despite global slowdown. $n the (welfth 6ive Gear plan total
investment is estimated to be FJJ1% crores. With prospects forgrowth in tier $$ and tier
$$$ cities looking bright the :inistry of /ivil Aviation2:o/A1 has approved new
5reenfield airports. (he Davi :umbai airport is to bethe largest 5reenfield airport in
terms of cost and capacity and is expected to be bidout this year. (he nodal agency
/$7/I is in the process of finali&ing the bid mechanism. -owever feasibility of such
large pro"ects continues to be a concern. $nfrastructure linkages are also immensely
important since provision of ade=uate road rail and water transport facilities will be
critical for the success of large scale airport development plans.
(ow"r .
$ndiaBs total installed power generation capacity stood at # 11J<<.## :W as on ,1'01'
#01,. .obust economic growth and enhanced industrial activity has significantly
increased the demand for power in the country leading to as much as1# % peak hour
power shortages. (his makes a compelling case for further large scale investments in
the sector. $n the (welfth 6ive Gear plan total investment is estimated to be 1501<<<
crores. With the announcement of 1% 4ltra mega power pro"ects 24:!!s1. Iut of these
four 2)sn :undra >rishna !atnam and (ilaiya1 have already been awarded to private
players.
Oi$ 3 Gas
$ndias oil E gas sector continues to grow steadily boosted by enhanced investments
increased production and rise in private participation. $n the next five years planned
additions include <0., ::(!A of refinery capacity. J.05 ::(!A of new CD5 terminals.
$n the (welfth 6ive Gear plan total investment to be 1%F;;,crores. !ro"ects include an
1F ::(!A refinery being setup by $ndian Iil /orporation and a cracker unit of 5
::(!A capacity by .eliance $ndustries Cimited in ?amngar.
D"0an% Dri)"rs of Constr!tion Mat"ria$s In%str20'
5overnment initiatives in the infrastructure sector coupled with the housing sector
boom and urban development continue being the main drivers of growth for the $ndian
construction materials industry.
9 In%i)i%a$ Hosin& D"0an% (ri0ar2 %ri)"rs
L *fforts by the government to boost the demand for houses in the below .s#0'lakh
category in stimulus packages.
L 7ecrease of land prices and steel prices
L $ncrease in minimum support price 2:)!1
L $ncrease in pay for workers under the flagship rural "ob guaranteescheme.
L $mplementation of debt waiver scheme.
L $mplementation of the )ixth !ay /ommission.
9 -uge infrastructure investment planned for (welfth 6ive Gear !lan 2#01#'1J1
amounting to .s. 5<.,# lakh crores is also expected to drive the demand for
construction material industry.
Constr!tion E4i10"nt S!!"ss Fa!tors
1. Ability to introduce $ndia specific products that include low priced multipurpose
e=uipment to attract new customers and to increase mechani&ation in important areas
adding features to products that make suitable for use in $ndia and launching new
applications and products for missing applications.
#. Ability to capture exports opportunities in areas such as engineering and design
services that leverage the $ndiaBs technical prowess
,. Muality delivery and pricing of after @ sales service.
%. Ability to provide end'to'end services including e=uipment selection financing
maintenance training and repairs.
5. $ntroduction of newer services such as rentals and financings to cataly&e latent
demand particularly from rural areas and small towns.
<. )trengthening of dealer and channel network to address buyer fragmentation
following the trend of sub @ contracting and geographic expansion of demand.
Constr!tion E4i10"nt Ris5 Fa!tors
1. /ompetition from low'cost producers.
#. (ax burden and anomalies' $ndia has one of the highest indirect taxes on construction
e=uipment.
,. 7ependence on import for certain critical components.
%. Holatility of steel prices impacting production costs.
#ENEFITS OF THE CONSTRUCTION INDUSTRY TO THE SCOIETY'
1. Absorbs rural labour and unskilled workers 2in addition to semi'skilled and skilled1
#. !rovides opportunity for seasonal employment thereby supplementing workers
income from farming.
,. !ermits large'scale participation of women workers.
%. 7evelopment of $nfrastructure thereby sustaining the growth of economy.
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