Construction Industry: Realizing Dream of a Developed India

Investing in India’s Present to Provide Better & Sustainable Future

The available job opportunities in the construction business are ever increasing in the cities of India.  Migration of the rural population in search for better work experience has led to major population explosion in urban areas in the 21st century, and is expected to reach 590 million by 2030, thus almost doubling within just thirty years.

Sunil Kumar Gupta, Founder Chairman of SARC & Associates and SARC Foundation, outlines important prospects which are available for construction businesses such as Smart Cities, multi-lane national highways, and so on. Investment in these fields could very well help increase employment and thus make working population of India more active and efficient.

The Present Scenario:

The Present Scenario:

The construction industry is the second largest employer and contributor to economic activity, after agriculture sector. The construction sector accounts for second highest inflow of FDI after the services sector and employs more than 35 million people. Facts & Figures

◦ USD 1 trillion investments for infrastructure sector projected in 12th five year plan (2012-17).

◦ UDS 650 billion investments in urban infrastructure estimated over next 20 years.

◦ 100% FDI permitted through the automatic route for townships and cities.

◦ 100% of India’s GDP is based on construction activity.

◦ 100% of the demand for construction activity in India comes from the infrastructure sector; the rest comes from industrial activities, residential and commercial development, etc. The Indian construction industry is valued at over USD 126 billion.

◦ Indian cities contribute significantly to India’s GDP. As per a mid-term appraisal in 2012, the urban share of the GDP was 62–63% in 2009-10. This was further projected to increase to 70–75% in 2030.

◦ In 2001, about 286 million people were living in urban areas across India. It had the second largest urban population in the world. As per the Indian Census 2011, the urban population had increased to 377 million, thereby registering a growth of around 32%. As per recent estimates, nearly 590 million people will live in Indian cities by 2030. ◦ Between 2005 and 2008, the real estate sector grew by about 30% annually before slowing down significantly due to a 2008 global financial crisis. It grew by about 8% between 2009 and 2011 and 6.5% in 2012-13.

◦ As per industry estimates, the Indian real estate market is estimated to be approximately USD 78.5 billion in 2013 and is expected to grow to approximately USD 140 billion by 2017. Sector Policy Real Estate Regulation & Development Bill, 2013

◦ The Real Estate Regulation & Development Bill has been formulated to bring in transparency and efficiency in the real estate sector. Heritage City Development and Augmentation Yojana (HRIDAY)

◦ HRIDAY aims to preserve and revitalise the soul of an Indian heritage city and reflect its unique character by encouraging aesthetically appealing, accessible, informative and secured  environment and to undertake strategic and planned development of heritage cities aimed at the overall improvement in quality of life with special focus on sanitation, security, tourism, heritage revitalization and livelihoods retaining the city’s cultural value. It is a central sector scheme with 100% funding coming from Central Government Smart Cities Mission; and Atal Mission for Rejuvenation and Urban Transformation (AMRUT)

◦ Under 100 Smart Cities Mission, Smart Cities will be selected through a ‘City Challenge Competition,’ linking financing and ability to achieve multidimensional objectives of urban infrastructure development like adequate and clean water supply, sanitation and solid waste management, efficient urban mobility and public transportation, affordable housing for the poor, power supply, robust IT connectivity, governance, especially e-governance and citizen participation, safety and security of citizens, health and education, and sustainable urban  environment.

◦ AMRUT will inculcate a project approach to ensure basic infra services such as water supply, sewerage, seepage management, storm water drains, transport and development of green spaces and parks with special provision for meeting the needs of children.

Swachh Bharat Mission (SBM):

◦ SBM aims at elimination of open defecation, eradication of manual scavenging, scientific Municipal Solid Waste Management, to effect behavioural change regarding healthy sanitation practices, generate awareness about sanitation and its linkage with public health, capacity augmentation for ULBs to create an enabling environment for private sector participation in Capex (capital expenditure) and Opex (operation and maintenance). The mission outlay is INR 62,009 crores. It covers all 4041 statutory towns. Reasons to Invest

◦ Construction sector in India will remain buoyant due to increased demand from real estate and infrastructure projects. ◦ An investment of USD 1 trillion has been projected for the infrastructure sector until 2017, 40% of which is to be funded by the private sector.

◦ Construction activities contribute more than 8% of India’s GDP. ◦ 100 smart cities and 500 AMRUT cities will invite investment of 2,000 billion rupees in the next 5 years.

◦ An estimated USD 650 billion will be required for urban infrastructure over the next 20 years.

◦ Technologies for the promotion of low-cost and affordable housing.

◦ Green building solutions.

◦ Smart cities.

◦ Urban water supply, urban sewerage and sewage treatment.

◦ Growth Drivers

◦ India has an estimated urban housing shortage of 18.8 million dwelling units.

The housing shortage in rural India was estimated at 47.4 million units in 2012.

◦ There is need for re- generation of urban areas in existing cities and the creation of new, inclusive smart cities to meet the demands of increasing population and migration from rural to urban reas.

Incentives for developing electronic manufacturing clusters:

 Brownfield EMC: The assistance will be restricted to 75% of project costs, subject to the ceiling of INR 0.5 Billion. The remaining project cost will be financed by other stakeholders of the EMC with a minimum industry contribution of 15% of the project cost.

 Greenfield EMC: The assistance will be restricted to 50% of the project cost subject to ceiling of INR 0.5 Billion for every 100 acres of land. The remaining project cost shall be financed by other stakeholders of EMC with a minimum industry contribution of 25% of the project cost. FDI Policy: Construction – Development projects (which include development of townships, construction of residential/commercial premises, road or bridges, hotels, resorts, hospitals, educational institutes, recreational facilities, city and regional level infrastructure, townships) – 100% FDI through automatic route is permitted. The conditions under this sector are:  No minimum land area requirement in case of development of serviced plots.

 In case of construction-development projects, minimum floor area of 20,000 sq. mts.

 The investee company should bring in a minimum FDI of USD 5 Million within six months of commencement of the project. The investor will be permitted to exit on completion of the project or after the development of trunk infrastructure i.e., roads, water supply, street lighting, drainage and sewerage. FDI Policy for Industrial Parks: 100% FDI is allowed under the automatic route. ‘Industrial Park’ is a project in which quality infrastructure in the form of plots of developed land or built-up space or a combination with common facilities is developed and made available to all the allottee units for the purposes of industrial activity.

Government Incentives

Key Incentives

Smart Cities

The Government of India in the Union Budget 2014-15 has announced a project to develop ‘One Hundred Smart Cities’ as satellite towns of larger cities by modernizing the existing mid- sized cities in the country. INR 70.6 billion has been allocated in the current fiscal year for the same. State Incentives

Apart from the above, each state in India offers additional incentives for investments and special incentive packages for mega projects. Area-Based Incentives

Incentives for units in SEZ/NIMZ as specified in respective acts or the setting up of projects in special areas such as the North-East, Jammu & Kashmir, Himachal Pradesh and Uttarakhand.

Governing Authority

 The Ministry of Urban Development (

 The Ministry of Rural Development (

 The Confederation of Real Estate Developers Associations of India (

 The Builders Association of India (

 The Construction Industry Development Council (

The construction industry is thus exponentially growing, as can be seen from the various new policies and projects being initiated. It is a sector possessing immense potential and could very well prosper in the coming years. Sunil Kumar Gupta has further elaborated on these very dimensions, by giving information on the best opportunities in India, in his book “Make in India.” You can find out more by reading his engaging and informative blogs, or checking out his website

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