Indian market overview
- Economy recovery is gradual since the lift of lockdown regulations.
- The economy contracted by 23.9% in the first quarter of 2020, which according to the government data is by far the worst in 4 decades.
- The unemployment rate is 6.6% as of 18th November, an improvement from 23.4% in April 2020.
- It's predicted that the construction industry will shrink to about 14.9% in 2020 and will then rebound and grow to about 11.6% in 2021, because of pent up demand.
- India’s manufacturing purchasing manager’s index (PMI) rose to 58.9 in October 2020, the highest mark since January 2012.
- India is focusing on renewable sources to generate energy. It is planning to achieve 40% of its energy from non-fossil sources by 2030, which is currently 30%, and have plans to increase its renewable energy capacity from to 175 gigawatts (GW) by 2022.
Key Opportunities within the Indian market
- Based on our survey conducted in August 2020, nearly 40% believe that sectors like healthcare and warehouse are going to be in demand in near future. Full findings are in our August Market Report.
- Local procurement is expected to increase through the Government of India campaigns.
- A gradual move towards digitisation. In July 2020, International Data Corporation (IDC) reported that for 66% of construction companies in India digital transformation is a priority to drive much-needed changes to their processes, business models and/or ecosystems, while 70% have commenced their digital journey already.
- The World Economic Forum (WEF) has selected 36 cities from 22 countries and six continents to pioneer a new global policy roadmap for smart cities developed by the G20 Global Smart Cities Alliance. In India, 4 cities have been selected which are Bengaluru, Faridabad, Indore, and Hyderabad.
- Indian Railway network is growing at a healthy rate. In the next five years, Indian railway market will be the third-largest, accounting for 10% of the global market. The government has sanctioned redevelopment of the existing stations in Tier 1 and Tier 2 cities.
- The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform, which will allow all kind of investors to invest in the Indian real estate market. It would create an opportunity worth Rs 1.25 trillion (US$ 19.65 billion) in the Indian market in the coming years.
- The pandemic has affected the labour workforce in more ways than one. There is an increase in the cost of labour, no doubt, with costs towards preliminary costs and maintenance of the labour camps, maintenance of health and hygiene, higher bonus offers, paying airfare for their travel to return to the site (a little after the lift of lockdown) and personal protection equipment, all accounting to the labour cost component in addition to the daily wages.
- Based on our survey on construction cost in August 2020 nearly 50% predicted there will be an increase in the cost by 5% to 10%. Full findings are in our August Market Report.
- The overall cost of construction considering the components of project costs such as material, labour, overheads, prelims, and profit and or risk margins, 88% predict an increase in the cost between 5% to 10%.
- Based on our survey, tender prices have increased with over a third, who indicated the prices have increased up to 5% and more.
Key Market Trends
- The COVID-19 has accelerated slowdown and sectors that have reported a major decline in project tenders are roads (down 60% YoY), power distribution (down 52%), water supply and irrigation (down 45-50%) and even railways (down 31%). However, the Government is keen on investing in infrastructure projects.
- On the brighter side, the National Highways Authority of India (NHAI) has awarded a total of 40 projects for a total cumulative length of 1330 km during April to September 2020 with a capital cost of circa INR 472 billion.
- The Government of India is making large investments in modernisation and upgrading of railway stations. Under Adarsh Station Scheme, about 1,253 stations have been identified and are planned to be developed by 2019-20.
- It's forecast that the infrastructure sector in India will grow at a CAGR of approximately 7% from 2020 to 2025.
- The government’s efforts on improving the country’s energy infrastructure will provide an investment opportunity worth INR 21 Lakh crores in the next 10 years.
- Initiatives like “Housing for All” and “Smart City Mission” is an effort by the Government of India to reduce bottlenecks in the infrastructure sector.
- To support the COVID-19 vaccine development initiative, at present, there are 30 potential COVID-19 vaccine candidates in development, with three being in the advanced trial stages in India.
- India is likely to grow into a 65-billion-dollar industry by 2024 to 120 billion dollars by 2030 in the Pharma and Medical device sector.
- Telemedicine market in India is predicted to grow at a compound annual growth rate (CAGR) of 31% for the period 2020–25 and reach USD 5.5 billion.
- There is a growth in virtual care such as teleconsultation, telepathology, teleradiology and e–pharmacy in India due to the current pandemic situation. The teleconsultation and e-pharmacy will account for around 95% of the telemedicine market by 2025 which amounts to USD 5.2 billion.
- 650+ million internet users resulted in the growth of data centres across the country in the past few years.
- The market size by investment was projected to be over $4 billion by 2025, growing at a CAGR of 4% with the base year in 2019.
- At present, data centres in India’s top 8 cities occupy 7.5 million sq ft space and the key cities leading the demand for data centres to include Mumbai, Chennai, Bengaluru, and Hyderabad, among others. It is expected that the demand will increase post-pandemic for this segment fetching annual rental yield of 10-14%.
- The government’s move to make data localization mandatory ensures a promising future for data centres in the country.
- Data centres are emerging as an alternative real estate asset class with huge potential, and leading real estate developers are zeroing in on this opportunity to reap superior returns from early investments.
- Investment plans for building data centres in India over the next decade and more are introduced by the leading corporates.
- The healthcare market can increase three-fold to Rs 8.6 trillion (US$ 133.44 billion) by 2022.
- Health insurance is gaining momentum in India. Gross direct premium income underwritten by health insurance grew 17.16% YoY to Rs 51,637.84 crore (US$ 7.39 billion) in FY20.
- The Government of India is planning to increase public health spending to 2.5% of the country's GDP by 2025.
- The logistics market in India is forecasted to grow at a CAGR of 10.5% between 2019 and 2025.
- Increasing investments and trade points toward a healthy outlook for the Indian freight sector. Port capacity is expected to grow at a CAGR of 5% to 6% by 2022, thereby, adding a capacity of 275 to 325 MT.
- Indian Railways aims to increase its freight traffic from 1.1 billion tons in 2017 to 3.3 billion tons in 2030.
- Freight traffic on airports in India has the potential to reach 17 million tonnes by FY40.
- Manufacturing has emerged as one of the high growth sectors in India. The government of India launched the ‘Made in India’ program to place India on the world map as a manufacturing hub and give global recognition to the Indian economy. The government aims to create 100 million new jobs in the sector by 2022.
- In May 2020, Government increased FDI in Defence manufacturing under the automatic route from 49% to 74%.
- Government of India introduced a production incentive scheme (PLI) for large scale electronics manufacturing.
- National Policy on Electronics (NPE), passed by the Union Cabinet in February 2019, envisaged the creation of Rs 27.96 lakh crore (US$ 400 billion) electronics manufacturing industry in the country by 2025.
India Office Overview
Notable India projects
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• Godrej Two
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