Is the Indian construction sector prepared for growth?
India is set to be the third largest construction industry in the world by 2025 – but is the country ready to take on the challenge? Mace’s William Carr Miles, a Commercial Manager working in Delhi, looks towards the future of the sector.In 1960, 18 percent of India’s population lived in cities. Today, that figure stands at 34 percent – more than 449 million people. India now has one of the largest urban populations in the world, second only to China. By 2050, that figure could be more than 814 million; larger than the current total population of the United States, Indonesia and Brazil combined.
That huge urban growth and need for supporting infrastructure is driving a similarly significant expansion of India’s construction industry. According to KPMG, by 2025 the country’s construction sector will be the third largest in the world, behind China and America, with an overall value of $1 trillion.
Although compared to its total population this means the Indian sector will still be undervalued compared to other more developed states, that relative value masks a huge rate of development and construction fuelled by rapid urban growth; currently more than 7% a year.
Is the Indian construction sector ready for that growth to continue and accelerate? How will it keep up with spiralling demands for capacity, materials and skills? Such spectacular growth rates are rarely accompanied by similar expansions in the appropriate regulation and risk management in any industry.
Huge growth is already bringing concerns about companies cutting corners to ensure quick delivery, the development of regional monopolies and insufficient improvements in health and safety conditions.
It also means the Indian construction sector is moving very quickly into new markets – like smart cities and data centres – where local expertise is currently limited and will become stretched as demand grows to deliver the right product reliably. While there is a clear future pipeline of trained professionals to tackle these challenges in the long term this lack of available talent now could limit economic growth and prevent local innovation in other sectors.
The Indian Government has clearly recognised both the need for fast sector growth and the risks that poses. A number of initiatives – from the 100 Smart Cities programme and the AMRUT infrastructure development scheme to the introduction of the RERA Act and changes to the laws regulating foreign direct investment – show that there is clearly the will to act to help develop the construction and property sector.
However, those changes are often attempting to deliver swift, wholesale cultural change in an industry that is often not ready to move that quickly. If the industry is to grow then the government needs to find a right level of intervention – enough to strengthen standards but not so much that regulations become impractical and stifle innovation.
At Mace, our experience in India has shown us the huge potential of the local construction sector – a powerhouse of delivery with huge potential for growth and a chance to become a world-leading industry. In order to achieve that potential, however, the sector has to quickly improve efficiencies across the supply chain.
That means better management of programme and resource, as well as adopting innovations and modern methods of construction. Although local labour conditions mean that the benefits of automation and offsite are unlikely to be realised soon, digital construction tools and tighter project controls have the potential to transform construction delivery in India.
Other initiatives, like creating a proactive health, safety and wellbeing culture, the promotion of a more diverse contractor ecosystem and a focus on skills growth and equal opportunity employment will help to create a modern, forward-looking sector with the broadest possible access to new talent.
One way to expedite this process would be by working with international partners. By doing so the Indian construction sector can draw on the progress already made elsewhere to leapfrog the problems that have plagued the industry in other countries. On issues like programme controls and management, for example, international consultants are able to draw on expertise developed in their own countries to transform local delivery.
Adapting the techniques used elsewhere to be effective in an Indian context will be challenging. Every country is unique, and Indian’s development sector certainly has a set of challenges and opportunities that aren’t present elsewhere, from the sheer scale of the expected growth to local labour conditions and attitudes towards health and safety.
Success will only be achieved in this context by helping to develop local expertise and capacity that will spark a long-term sustainable change, rather than short term adoption of new methodologies.
However, the potential benefits to all stakeholders across India are huge – and the risks of failing to adapt and evolve are even bigger. As the Indian market looks towards the future, it must be ready to work in new ways.
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