Report on Indian construction market
and company’s entry into India and other countries in the region
Overview............................................................................................................................... 3
Factors affecting the Construction requirement in
India........................................................ 6
Social, Cultural and Political Aspects.................................................................................... 8
Required Strategies and Planning......................................................................................... 9
Conclusion.......................................................................................................................... 11
Overview
India, the seventh largest country by area, the second most
populous country with a near population of 1.2 billion people, situated in
South of Asia has been known all over the world for its historically
acclaimed heritage and cultural
diversities. If the pages of History are read it can be interestingly noted
that the factual pages of its existence is like the heart of a busy Ant hill,
wherein there always has been some activity that has kept the country busy.
Constantly subjugated to change, be it Kingdoms, Religions or even the climatic
conditions.
In today's world although this very country has created a
breakthrough highway into technology and its applications with most of its
educated society taking part in the technical marathon. Its traditional and
economical content is slowly yet steadily been affected by the modern
mechanisms. More and more people from the rural attires are now fascinated and
practicing the western lifestyles. To be precise modernization is here to stay.
As the majority of the population is now moving towards urban
patches, the demand for housing has sky rocketed magnificently. As more
Companies from different part of the world are setting shop in the Indian soil
the need for Office spaces is increasing with a higher inclination. With the
spearhead of IT development in their hands many indigenously built companies
have set their standards no less than the already existing "big
Hands" of the industrial sector.
All the development given a tremendous bloom to the
construction sector, With Prestige and profits playing the upper hand Companies
are leaving no stones unturned to ensure that their office space buildings are
equipped with international standards of elegance and propriety. With the
increasing number of people moving towards the city the housing requirements
have now shifted gravity from the individual houses to "Cloud
pecking" Apartment to house the requirements of the flocking masses.
The demand for housing and office space construction is
expected to increase furthermore with more urbanization on the cards.
Global
construction has been growing at a rate of 70% from US $7.2 trillion in 2012 to
US £12 trillion by 2020. India, China and US contribute to nearly half of this
growth. (http://www.globalconstruction2020.com/) India is having a high growth rate
due to the fast growing construction and manufacture industry along with the
availability of cheap labour.
The percentage of Indians now living in the urban areas has steadily
grown by 31.2% between 1991 and 2001. Yet, in 2001, over 70% lived in
rural areas. According to the 2001 census, there are 27 million-plus
cities in India among them Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad and Ahmedabad are the most
populous metropolitan areas. The literacy rate in 2011 was 74.04%: 65.46% among
females and 82.14% among males.
Even
though there have been some dull years in the construction due to recession but
during such period too Asia had a positive growth. This fact gives a confidence
for us to enter India market when the conditions in the rest of the world may
not look very impressive.
During the
current phases, Europe has been going through a financial crisis and is rather
not advisable to invest in a market where already existing number of local
companies have stamped their presence. Russia has growth in transportation and
energy sector. Construction industry in Western Europe had reduced by 2% in
2010. By 2020, India is expected to have more construction demands to meet its
housing and office needs. India would need to spend a good share of its GDP on
the construction for infrastructure projects such as roads, bridges, trains,
ports, technology, factories and office buildings.
Share
of construction spending by region 2010-2020.
Source: IHS Global Insight (2010)
Forecast
Average Annual Global Growth in Construction Output 2010 ‐ 2020.
Source:
Global Construction 2020 – Oxford Economics, 2011
Factors
affecting the Construction requirement in India
Population Density per
Square Kilometer
As the Above graph states the population density per square
kilometer has been continuously on the rise, giving rise to needs for housing
facilities to accommodate more families.
Net Migration Rate
As can be seen from the above graph the Rate of Migration
towards Cities in India has always been on a rise. Such a graph only hints
towards the positive growth that it can bring upon the construction needs
starting from residential apartments, Office Spaces, Roadways, Highways,
Airports, Buildings for Basic Amenities , Bridges, Dams and many more such
construction prospects whose list would be never ending if further research is
conducted.
Urbanization
Urbanization is an irreversible process and is very evident
from the above graph where in the Major cities and their growth as time heads
towards 2030 can be seen. Needless to say that the construction requirements
are only laddering up their way to capitalize the present and future needs.
Social, Cultural
and Political Aspects.
Traditionalism:
Majority of the people living in the construction attracting
cities prefer to live with the most modern amenities in par with the western
countries. With Internet and Television the whole outlook of the Younger
generations have changed. Often preferring the western styled interiors, the
home seeking generation of today plan their interiors based on the latest of
the western styled elements.
Although the fact that Indians are indeed modernizing cannot
be ignored, but there is always a layer of traditionalism that is always hidden
under their skin. Such Traditionalism has had its affects on the construction
industry too. India has been well nurtured by its history of traditionalism. Understanding of the traditional practices is
very much important for any foreign construction company. Vaasthu is one of the most important traditional ingredients
that have evolved itself into a full time education. Vaasthu is basically a
study of how the house must be constructed, starting from the dates of the
calendar to the positioning of the rooms, every task that is a part of the
construction is defined by some clause under the Vaasthu Rule book.
Cultural Values:
Indian culture system is a multithreaded knot that is not so
easy to break but can easily be differentiated with the color of the thread. As
per the study India constitutes of various races which are Caucasoids, Australoids, Mongoloids and Negritos. Genetically it
may be easy to identify the race of every individual but culturally it is a
whole different study. People have developed their own cultures over a period
of time based on their practices. Such Practices have also had an impact on the
construction industry. Homes were differently styled in different parts of
India before Urbanization began. In the Urban Cities although most houses only
aim to look modern, but there is still a need of understanding the Cultural
background of the Client for whom a house or a structure is being built.
Language Barriers:
India had been under the British influence from the early
1600’s to 1947, a well over 3 centuries and hence the use of English is very
common at least amongst the educated sect of the society, With more than 3000
languages amongst its different states and more than 5 national languages,
English is slowly taking over the common languages as is the need of the
outsourcing market from India. It would be easy for a company coming from the
U.K to understand all documents as majority of Legal documents are written in English
and even if not, an English version of the document is always available.
Nature of People:
India, if its history were to be traced has more commonly been
subjected to foreign invasion. This houses the fact that the hospitability of
the Indians is far greater than any other nationality. Majority of the people
of India look towards the lifestyle of the western countries as more developed
and yearn to live the western way of lifestyles. As more and more people travel abroad to
different countries especially to U.S and the European countries they bring
back with them the yearning for western styled infrastructures, homes and
offices. Hence any new methodology or
process will be accepted far more easily as compared to other developed nations.
Indians are very religious in nature no matter what their
stature is in the society. Hindu, Muslim, Sikh, Christianity are the more common
religions practiced in India. Any kind
of comments against their religions will not be tolerated by the people or even
by the Government. Hence maximum refrain must be practiced even while
discussing the affect of religion either in the society or the construction
industry.
Required Strategies and Planning
Tie Up with Local
Construction Companies:
With high profits in the rent and sales from real estate
business a lot of small and big local companies have come up with their own
brands in the construction sector. It would be greatly advisable if the foreign
company ties up with the local brands for the initial stages so as to
understand the whole process at least for a calculated number of projects to
identify the nudges involved in constructing in India. Such alliance would help
the foreign construction company to identify their strengths and key areas
where they could spearhead their capabilities and slowly seep in their brands
amongst the people. Such Tie ups would naturally be beneficial for the local
company as they would be introduced to a more modern approach towards
construction and benefit in the alliance by honing their skills furthermore.
Local Government
Policies:
India stands as the second most populous country the world
and it would be surprising if one were to even question the amount of
corruption that is rooted into its system. As development in India has only
seen its fullest vigor in the recent past, the mass of people wanting to
capitalize on corruption has been on the rampage from the smallest to largest
scale. Every approval for a construction sanctions only after it touches a
couple of bribe maneuvered fingers of the officials in the government bodies.
The government laid rules of owning land is not very clear and there are very
high chances of existing loop holes in the legal documents that have been
produced before acquiring a land building purpose, hence it is very important
that a local legal executive is always in hand to confirm the legal procedures
before any buyout of Land for construction purpose. It is even more advisable
for outsourcing any construction related legal proceedings to a reputed firm to
ensure a clean chit for construction activity to commence.
Modern Methods of
Construction:
In India the construction methodologies still follow some
age old practices which have completely been abolished in the western or
developed countries, hence the availability of modern equipments and skilled
laborers may have to be studied carefully to suit our requirements and
flexibility. Importing of modern equipment may be a good idea as a developing
country like India values modernization and will be open for faster and
reliable methods of construction. Proper training will have to be provided to
the laborers for proper handling of such equipments. Also a detailed study
needs to be done to identify the methods that will have to be continued with
and the foreign construction company must be flexible to design and engineer
its plan and timelines to the current situation.
Material Requirements:
As discussed earlier most of the construction methodology
used in India is yet to see light of modern advancements in this field at least
for a few more years. But till then the foreign company interested in setting
up construction in India is advised to make enough study into the kind of raw
materials and methods that are used from the current day market. Such an
analysis would help the interested construction company to draw their
investment and profit margins clearly before venturing into the developing
country construction arena. Being a developing a country also provides a lot of
options for a cheaper products that may not be reliable on the long run, for
instance there could be a variety grades of cement available for usage, Proper
investigation would be required to identify the right variety or brand of
material that has to be used. As a known fact construction is not the quickness
that it completes with, but with the quality of material that has been put into
the building. Hence it is very important
that the construction company clearly identifies the risks and advantages with
the different raw material that is used the country.
Development started
of lately in India due to colonialism and for more than 40 years the
construction industry had been affected due to poor spending capabilities owing
to the fact that during the early years of after Independence period the
economic conditions in India had not been very good. But in the recent past
from 1998- Present day, there has been a considerable growth in the
construction industry. Also due to the boom in IT industry the demand for
office spaces has increased in parallel with the housing needs. During the
early years the cost of construction labor had not been very high because of
lack of education the number of laborers available for the construction
industry were plenty as the tasks in construction industry apart from designing
and engineering required minimum or no education. But in the recent past as the
education has paved through every corner of India the number of people
available for construction laborers is decreasing and as the demand
and supply architecture works the cost of the construction laborers has
been considerably increasing. Proper study into the salary structure and
availability of skilled laborers is required.
Such high cost of
labor has driven the child labor into the construction industry, even though
the Government of India claims it to be a strictly punishable offence, but
still this is being practiced in the construction industry. Hence it is very
important that the foreign company makes proper study into the Labor laws so as
to avoid any problem arising due to it.
Conclusion
Since its Independence India as a country has been
constantly moving towards development quickly attaining the “Developing” tag
after its independence and its sure standing ideology will be to soon enter the
“Developed” room of nations. With China as its neighbor who is fast becoming an
economic superpower, India will try to take every step possible that aligns
itself with development. Also with increasing economic value more and more
foreign investors are playing an important role in shaping up the face of the
country.
As education is now becoming mandatory and more and more
jobs available for the younger generation, thanks to the so called outsourcing
more people from the rural areas are now moving into the urban places seeking
for a better job and healthier life style. This shift of population towards the
cities has craved excellent pathway for the Construction industry to propel
magnificently.
To cater to the housing and Office requirements, Construction
companies can be rest assured that they are here to stay and a good strategy
will provide ample opportunity for companies involved in this business.
As Western countries are the symbols of modernization, the
Governments of developing countries like India will be willing to handover projects
to companies who are more modern and bring in better practices for the
companies or people of their country to live better lifestyles.
With a highly competitive market like India a properly
studied strategy needs to be developed with the local bodies and companies that
the foreign company wishes to associate with. It would have to be on a very
practical approach, the company will have to be ready to deal and responsibly
face all the issues that could come along their way in the setup and operation of
a construction firm in a country like India.
References:
http://www.indexmundi.com/g/g.aspx?v=21000&c=in&l=en
http://www.urbanindia.nic.in/programme/uwss/MGI_india_urbanization_fullreport.pdf
http://www.iutindia.org/ntpdc811/Annexure17.pdf
http://trak.in/tags/business/2010/04/24/india-urban-2030/
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