Construction in India

Construction in India

Construction in India has the potential to create 1.5 crore productive jobs, and can by itself contribute 11.5% of the new jobs that need to be created by 2030. Currently, the Construction sector accounts for ~12% of the total workforce in India.

India’s Unfulfilled Demand for Construction

There is a strong unfulfilled demand for construction in India with an annual growth potential in double digits. This can be attributed to:

1 . The transformation of ‘kutcha’ to ‘pucca’ houses

While the proportion of Kutcha housing has come down, about 25% of the population still lives in Kutcha or Semi-Pucca houses. 

2. Growth in number of households

Despite declining population growth, the annual growth in the number of households has been steady at 2.4-2.5%, driven by the fall in household size over the years. 

3.  Increase in average house size

Another factor contributing to increased construction activities is increase in average house size. Floor area has grown at over 2% per annum 

4. The rise in demand for non-residential construction

With strong growth in the services economy of over 10%, construction has a high-growth potential in sectors like retail, offices, hotels, restaurants and warehousing. 

Construction can start a virtuous cycle of investments owing to increased disposable incomes and growth in allied industries

Allied Industries that will benefit from Construction

  • Steel: 40% of the input for construction is steel
  • Cement: A recovery in cement volumes will add to the bottom lines of cement companies
  • Paints & cables: Other industries that will see an increase in demand owing to growth in construction are paints and cables

Some of the other industries that will benefit from increased disposable income are consumer durables, transportation, and other services.

India needs to make more land available and simplify laws governing construction to make housing affordable and fuel demand

Make land in litigation available sooner 

  • Land conversion of urban land where agricultural land unused
  • Free up government and sick PSE land for housing
  • Increase Land Supply

Use Land More Efficiently

  • Provide higher FSI in line with improving infrastructure
  • Create better zoning policies – mixed zoning like Japan
  • Provide connectivity to outskirts through public transport

Reduce Obstacles & Cost in Construction

  • Simplify town planning clearances
  • Create better and transparent processes for fire and safety 
  • Make it easier to get utilities connection and OC
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