Building construction equipments Industry: Overview for 2016

The construction industry amounts to more than 7% of India’s GDP and is expected to rise in the coming years. The industry is one of the core sectors in the Make in India initiative and is likely to create millions of jobs in the near future. That being said, manufacturing of construction equipments for building is on a rising trajectory to meet the requirements of increasing urban and rural infrastructure. With 2015 seeing slow but drastic changes to make the environment friendlier for growth, here is a brief over view of what can be expected in the months to come.

The trends for the coming months will remain to be urban rural and transport infrastructure. With the rapid increase in the need for infrastructure, the demand for building construction equipments is also increasing at an unpreceded rate and will continue to do so in the coming months. With the huge number of smart cities that are planned, the new growth in the CE industry will easily be absorbed.

The number of ongoing projects is increasing and will continue to do so, especially given the new tenders that the government is passing one after the other. The demand for new heavy equipment will rise steeply in addition to a boom in the old equipment market and the rental business. In addition to the construction industry new segments like commercial projects, mining, agriculture, etc are also shifting to standardized equipment adding to the demand of the machinery.

Rental business is still in its initial stages in India and penetration is surprisingly low as of now, but with availability of easier financing the scenarios is set to change. Rental is a good option for small business owners and new ventures in the industry. Keeping that in mind, it would be wise to assume that the rental business will boom in the tier II and tier III cities where capital is a constraint. While there are growth opportunities, there are challenges too. Here are some of them to throw some light on the current scenario. The market for used equipment is not well developed in India and the resale value is also meager despite products being in sound condition. This is becoming a major challenge for the market players. In addition to it low rental penetration is still a problem and will take time to grow posing yet another challenge. Low penetration also means less availability of options and difficulty on cutting down on capital expenditures. Lack of skilled labor is another huge challenge, the supply for heavy equipment operators and skilled experts is falling short to meet the heavy and increasing demands of the industry. In addition to it there is no stability in the demand in terms of demand and pricing thus making things difficult for equipment suppliers.

While there are challenges, they can be met with strong collaboration between the government and private players’ to help stabilize and create a suitable environment for growth to help the industry meet its full potential.