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Term Paper – Infra PM

Infrastructure (Real estate) in India – A Boon or a Bane

Bharat Bansal (CE08B006) IIT Madras – VII Semester Term Paper – Infra PM

Social & Personal Services % Growth required 9% growth 9. it is imperative that the country develops the required infrastructure to sustain this economic growth. but the country will have to surpass several obstacles to achieve this target. However the strong level of economic growth achieved in India in recent years. 40% of the traffic volume in India is borne by 2% of the roads in the country. Gas & Water Supply Construction Transport. electricity. The Infrastructure industry will need to grow at an average pace of 10%. Creation of world class infrastructure has been recognized as a key priority and necessary condition for sustaining growth momentum of the economy for achieving a sustainable and inclusive GDP growth of 9 to 10 per cent over the next decade. According to BCG report. In recent years the industry has evolved from highly fragmented and highly unorganized market into semi-organized market. It is estimated that the Infrastructure Sector needs to grow at a CAGR of 15% over the next five years to support the growing requirements of virtually every other sector of the Indian Economy and the government has laid down the roadmap of allocating almost $1 Trillion in the 12th five year plan exclusively to infrastructure. th Growth sector wise requirement 14 12 10 8 6 4 2 0 Agriculture. which in turn has fuelled the demand for better infrastructure services. Increased infrastructure spending should sustain higher growth.5% growth Sector 1 Graph -1 : The graph indicates the country will need heavy investments (and growth) particularly from the transport and real-estate sector. especially post-liberalization years has led to an expansion of industry. Infrastructure is one of the most important sectors of the economy which has a direct effect on the people and defines the progress of the nation. Forestry & Fishing Mining & Quarrying Manufacturing Elect.405 million from April 2000 to January 2011 wherein the sector witnessed FDI amounting $1. and the Indian government in its 12 five year plan (2013 -2017) plans to double the total budget allocation for infrastructure from $ 500 bn to $1 Trillion. Communication & Storage and Tourism Financing. communication and access to proper transport. recording cumulative foreign direct investment (FDI) inflows worth more than $9. commerce and income.048 million during April-January 2010-11. Private sector investment is also expected to increase from 36% in the 11th plan to 50% in the 12th plan.Infrastructure demand in India – Real estate sector Introduction: Infrastructure investment has grown rapidly in India over the past few years. The IMF projects that despite the ongoing Euro crisis the Indian economy will grow at a pace of 9% in the next few years. much above the actual GDP rate to compensate for sectors such as agriculture. a country increasingly playing a major part in world politics and being hailed as the next superpower. sewage facilities. 1 2 Compiled from 12 year plan report data-base Report by Fitch. It also holds the status of one of the highest FDI attracting sectors in India. A significant ‘Infrastructure Deficit’ prevails with millions not having access to basic needs like safe drinking water. US rating agency th . It is the backbone on which the nation marches ahead. Insurance. India is one of the world’s largest and most dynamic infrastructure and project finance market in the world 2 and the government has set ambitious plans by planning to setup 800 SPV’s (Special Purpose Vehicles) to meet this deficit. For India. Real Estate & Business… Community. This is also important as the country will need to reduce its dependence on primary industries with a shift to other sectors to achieve the developed economy status.

Favourable demographics and growth in the services sector. Only 34.10. Philippines. from 16000 Cr. Exemption for domestic suppliers producing capital goods for mega power projects has been increased.4% compared with the world average of 2% during 2005-10. Reliance power.% of population 3 Compiled from WHO database . The following chart gives a comparison between 3 percentages of people living in the urban areas in India as against the globe . resorts. the controversies around the execution of the infrastructure projects may have created an adverse impact on the perceptions about the country. 2. from the current year to Rs. 10. Companies such as Moser Baer (India) will witness a reduction in cost od the project with these exemptions. built-up infrastructure.% population India .700 MW capacity was achieved by the end of FY10. in 2011-12. hospitality and entertainment (hotels. 8. 30 billion from the existing INR 20 billion. will lead to higher efficiency. 7. people are migrating from rural to urban areas. The government has cut down on expectations in this sector. economic services (hospitals. have primarily driven growth in the real estate sector. Peru and Venezuela.000 Cr. 56 54 52 50 48 46 44 42 40 2000 2005 2010 2015 2020 World. The 2010 IMD World Competitive Yearbook for Infrastructure ranks India 54th out of the 58 countries with India only beating Indonesia. Tata power. JSW Energy would be partially resolved. The government has provided tax-shields to the customers with a rebate of Rs. especially the IT and IT enabled Services sector. Comprehensive policy for further developing Public Private Partnership (PPP) projects. 100% FDI has been allowed in townships. ports. Housing finance will be provided at competitive rates to targeted groups in rural areas. An important step in increasing foreign participation in the infrastructure industry. which provide higher participation of private players in infrastructure development. Allocation for Bharat Nirman programme proposed to be increased by Rs. The Government of India has recognized the importance of private involvement in such large projects and provided appropriate incentives for this purpose.3% YoY to Rs 214. Lured by better employment opportunities and higher living standards. Allocation for infrastructure in 2011-12 has been increased by 23. financing requirements for the companies such as – NTPC. India’s urbanization is growing at a faster rate of 2. cinema theatres) industries.000 Cr. 18. 20000 (through infra-bonds). further enhancing demand for real estate and transforming India from a rural society to an urban/semiurban one. To boost infrastructure development in railways. housing. 9.4% of the planned target of adding 78. But somewhere in the recent past.000 ceiling. tax free bonds of Rs. 4. or 48. This will boost the flow of bank funds for financing infrastructure projects in the rural areas. 100. Infrastructure demand in the country: Real estate – The real estate sector’s growth is linked to developments in the retail. The operational efficiencies of State power transmission and distribution companies will increase. By 2020.Current budget highlights and its implications – 1. 6. 5. The budget has been very radical in making reform which are expected to boost the infrastructure development in the country. 300 billion will be issued by various Government undertakings in the year 2011-12. 3.5% of total plan allocation.000 Cr.000 Cr. India is expected to catch up with the world average by 2025. The planned power capacity additions have been lagging behind the targets set by GoI in the previous and hence the demand for power has been outstripping its availability. almost one-third (34%) of India’s gigantic population is expected to shift from rural areas and migrate to towns/cities. construction development projects and Special Economic Zones. This will generate funds for the government and ease financing. schools) and information technology (IT)-enabled services (like call centres). housing and highways. The corpus for Rural infrastructure development fund (RIDF) was raised to Rs. Increase in availability of funds for infrastructure.58. an added benefit besides the Rs. provision under Rural Housing Fund was enhanced to Rs.

the Govt.53 million houses has been estimated during the Eleventh Five Year Plan (2007-12). the shortage is mainly for the people belonging to the lower income group. Further ahead.5 million to 10 million INR and at various Tier -1 and Tier -2 locations. HDIL are some of the prominent players in this segment. There is another advantage in this sector that has been realized by the builders and developers. Tata Housing. clearly defined the affordable housing segment. Housing shortage 2007 All others 21% Rajasthan 4% Delhi 4% Madhya Pradesh 5% Karnataka 7% Gujarat 7% Maharashtra 15% Tamil Nadu 11% Uttar Pradesh 10% West Bengal Andhra Pradesh 8% 8% The graph indicates that Maharashtra has the biggest housing shortage. a shortage of 26. Govt. Middle Income Group – The Indian middle class is expected to swell up to 267 million people in the next five years. of India has taken multiple steps to boost affordable housing segment. 4 th Housing Requirement Projections for 11 Plan (2007-2012) . which presents the maximum growth potential in the residential sector. The trends are expected to continue because the fall in demand has been mainly due to high prices and higher cost of borrowing. Finance Minister continued the interest subvention of 1% housing loans up to 1 million INR for this fiscal year as well. has largely gone unnoticed by both developers and banks. However. States such as Gujarat and Tamil Nadu with comparatively better governance have a much lower requirement. The real estate market has witnessed a surge in the number of developers catering to this segment. Luxury Housing – Luxury projects have become a style statement for the upper middle class segment and evidence for this is the stupendous response developers are receiving for their ultra-luxury projects. As per the directorate. The low cost housing segment. thus providing a great market opportunity for firms. you can own a house or an apartment of your own in the next couple of years. JNNURM directorate defines the affordable housing in this category as houses ranging from 600square feet to 1200 square feet. However after a robust recovery from slow down the Luxury Housing segment has witnessing a steep fall in demand in the 4th quarter of FY11 and 1st Quarter of FY12.8 million households. Under Jawaharlal Nehru Urban Renewal Mission (JNNURM) Directorate. There is a significant demand supply mismatch in the housing sector . has. The residential housing can further be sub divided into:Low Cost/Affordable Housing – According to the report of the Technical Group on Estimation of Housing Shortage. according to National Council for Applied Economic Research (NCAER). Ansal Properties. 500 square feet for LIG. If you have a good repayment capacity. people who cannot afford a home of their own. and that is the ease with which home loans are being extended to the people.Key developments in the sector –segment wise: The following analysis gives a brief description of the key developments in the various segments real estate markets. Surprisingly. with changing trends. affordable houses for the purpose of this scheme may be taken as houses ranging from about 300 square feet (super built up area) for EWS. in the range of 2. In the Union Budget of 2011. Almost all the prominent developers have their offerings for the MIG buyers. real estate builders and developers in the country have started wooing these people. The increase in Floor Space Index in several Tier -1 cities is expected to increase the affordability in MIG housing segment. for the first time. reveal that approximately 75% of the real estate market in India is 4 made up of the housing market. by 2025-26 the number of middle class households in India is likely to more than double from the 2015-16 levels to 113. Residential Segment – Reports furnished by Ernst & Young.

the cost of borrowing is expected to stay higher thus deterring demand in this sector for the remaining 3 quarters of this fiscal Commercial/Retail Spaces – The office real estate segment is dominated by the country’s large and growing IT/ITES industry. but most of the plans were put on hold as the global economy 5 Webpage . It is anticipated that an estimated 55-60 million sq ft is lined up to get operational in the next two years. According to estimates prepared by the Assocham. and developers can expect to have a greater share of the retail pie. Hotel.000 50. IT/ITeS parks account for around 62% of the formally approved and notified ones. Hiranandani Developers. Moreover. across IT and commercial segments. but no major impact in the revenues are expected as a result from the downgrade. of office space in the top 7 cities. In FY10. Therefore the Real Estate industry can expect a strong demand for office spaces in the near future. Unitech. The following chart shows growth in SEZ exports 5 over FY04-FY11 : Value of exports SEZ 250. of which 363 are notified. There was brief panic within the industry after the recent downgrade of US credit ratings by Standard & Poor. 70% of the office space requirements are driven by the 7. Currently. According to DTZ. providing further push to the real estate investment and construction activity.asp . Mumbai. Most of the hotel companies had announced major expansion plans in the pre-crisis period owing to increasing demand supply gap. Numerous supermarkets and malls are coming up in India.sezindia.000 100. Parsvnath Developers among others. A large share of supply in the IT/ITeS space is expected to come from these SEZs. with the pan India office stock rising to more than 280 million sq ft.000 150. The commercial real estate sector also benefits from demand from the organized retail space. This was concentrated largely in NCR. Other fast-growing industries such as financial services and pharmaceuticals also contribute significantly to demand for office space. While the retail industry is still dominated by unorganized store formats.000 0 Value of exports SEZ SEZ exports registered a substantial CAGR of 59% during FY04-FY11. organised retail is expected to account for 15-18% of total retail in Indian market by 2015. and duty free imports for development. GoI has undertaken various policy initiatives to attract FDI in SEZs such as exemption from central sales tax and service tax. which led to many large real estate players entering SEZ construction and development.000 plus Indian IT and ITES firms. which accounts for majority of demand for the office space. Russia (33%) and China (20%).With India facing persistently high inflationary pressures. As of Oct 2010. IT industry has seen a strong recovery over the last 3-4 quarters which seems to be progressing undisrupted. the organized sector is rapidly growing.000 200. it recorded impressive growth of around 121% y-oy. Oberoi Realty. India witnessed the addition of more than 5 million sq ft of organized retail mall space across various primary and secondary locations. which is the lowest compared to its peers in BRIC countries .http://www.Brazil (36%). This was largely driven by several government policies such as tax incentives. Special Economic Zones – Rapid growth in Special Economic Zones (SEZs) has played a vital role in promotion of exports of goods and services and has enormously created employment opportunities. Bangalore and Chennai and was a consequence of the positive sentiments amongst retailers on spatial expansion and enhancing their footprints across the country. there were 580 formally approved SEZs in India. The year 2010 witnessed addition of more than 55 million sq ft. Major Players in this segment include developers like DLF. Resort and Tourism Segment – India’s tourism industry has posted a strong recovery over last four quarters or so after facing a tough time during the economic downturn. the organised retail only accounts for 5% of total retail. In 2010. operation and maintenance of SEZ units.

5 . DLF was fined Rs 600cr by India’s competition watchdog Competition Control of India (CCI) after the firm was proven guilty of violating Competition Act 2002. is a reflection of the problems ailing the sector. If inflation continues to hover at uncomfortable levels. on the other. As a result. Real estate is an asset class by itself and has an important place in many diversified investment portfolios. lower correlation with other asset classes such as equity and tax benefits are some of the key attractions for real estate investors. paving way for some price correction which is most likely to happen during the festival season of September-November. The recent land acquisition crisis in Noida Extension. coupled with further tightening in monetary policy. 3. prices too recovered equally rapidly and in some pockets have run ahead of the economic realities. Key demand deterrents in the sector: 1. Factors such as relatively stable cash flows from rental incomes. of India. Government should continue to support this industry by initiating policy measures that will continue to attract investments in this sector and offer housing for all by promoting inclusive growth. Getting Industry status would significantly bring down the borrowing costs for developers and thus reduce price of end products. and banks have not been willing to lend to the real estate sector in the recent past. 2. Outlook for the real estate sector .16%. This presents direct opportunities for the real estate industry in the form of new construction assignments. As a result. sustained increase in residential property prices. Cost of funds for developers is already very high. With the repeal of urban land ceiling regulations. which in turn. Presently. Demand from investors helps improve liquidity and increase the size of real estate market. 1894. DLF was supposed to complete its residential project in Gurgaon. This has created a further negative sentiment among the buyers of residential homes. We expect that affordable housing and companies focusing on this segment will continue to face strong demand. However. Interest Rates – The Reserve Bank of India (RBI) which is fighting a severe battle against rampant inflation has already hiked key interest rates eleven times in just 16 months and has also not ruled out more rate hikes going forward. Most large cities are facing rapid urbanization. it still falls short of meeting pent-up demand in these cities. In the long term. many banks would hit the exposure limit on the sector at a lower level of lending. in broader economy and improving outlook had helped the residential space get back strongly. rising home loan rates. which may have an impact on liquidity in the sector. after paying a fixed compensation in lieu of losses incurred by land owner(s) due to surrendering of his/their land to the concerned government agency. the RBI may take direct action such as change the provisioning norms or risk weight norms on real estate lending by banks. will provide a thrust to real estate development. any borrowing from the banking sector would be more expensive. with little land available for development. ranging anywhere between 14. would lead to higher borrowing costs and will have an adverse impact on demand as it will lead to postponing buyer’s decision of investing into real estate. although additional land is available for development. Lack of Industry Status – The real estate sector has been lobbying for grant of industry status by govt. with the Indian economy posting a strong recovery in 2010-11. Similarly the government has failed to allay the concerns of local residents of Jaitapur. However. However the government is in the process of passing a new land acquisition bill which would replace the Land Acquisition Act.The faster-than-expected recovery. Any change in risk weights or provisioning requirements by the RBI could have a double impact on the sector. Land availability and acquisition – One of the hurdles to real estate growth in India is lack of sufficient free hold land. the Finance Minister did not heed to the demand of real estate developers during the Union Budget of 2011-2012. The new law proposes to reduce the role of government in land acquisition and determine the price of land based on competitive bidding. pinching affordability and tightening monetary situation.stumbled in late 2008 and both domestic and global outlook became uncertain. On the one hand. With interest rates on the rise and inventory pile up. the sector is again passing through a lean phase. but buyers are yet to get possession. peak property price. However. Other factors such as favourable demographics and income levels and growing urbanization will continue to drive the long-term growth in this industry. post-recession. depending on the credibility of the borrower. as such acts by the market leader are expected to set negative trends in the sector. 4. . most of the players are beginning to chart out capacity expansion plans. Unfair Practices by Developers – India’s largest Real Estate firm. Real Estate as Investment – The real estate industry also benefits from demand from investors. The situation is not likely to improve in the next few months as expectations are rife that policy rates are likely to go further up by at least another 50 bps in FY12. Under the old act the government had the authority to acquire land for development purposes. a tool for hedge against inflation. growth in the Indian real estate sector is expected to be driven by rise in infrastructure spending by the government. property prices become unaffordable for large sections of the population. In the near term. in 2009. with inflationary pressure. amidst declining growth and high interest rate scenario the developers are failing to improve their sales. builders will be forced to reduce prices. between the real estate developers and farmers. Most of the players are busy cleaning their balance sheets and addressing the issue of excessive leverage. called Bellaire. where a Nuclear Plant is to be set up. This will contribute towards more inventories being piled up.

Is th the largest company on the Index. Even as the inventory in the commercial space remained higher. adding further upside to the real estate sector earnings.8 % of the total free float market capitalization of the universe of the stock traded on NSE. The Index comprises of 10 listed . CNX Realty Index constituents represent about 0. CNX Realty . The IT /ITES sector is one of the leading drivers of commercial office growth in India followed by banking. 2011) – 6 CNX Realty 6000 3000 5000 Turnover and Shares traded (Scaled) 2000 4000 1000 Returns (Scaled) 3000 0 Shares Traded Turnover (Rs. the recovery has been slow but of steady nature. Performance of the Infrastructure sector : The benchmark Indices on the National stock exchange was taken as a proxy to assess the performance of the industry in the past 5 years. The index performance is summarized below (daily frequency – Jan 2006 – 6 Nov.CNX Realty Index captures the performance of Real Estate companies.nseindia. DLF with a market capitalization of ~ 8000 Cr.In the commercial space. We expect modest recovery in commercial space on the back of strong net employee growth in the leading IT companies. The index is evaluated on the free-float based methodology. Cr) Returns 2000 -1000 1000 -2000 0 29/Dec/06 31/Dec/07 31/Dec/08 31/Dec/09 31/Aug/07 31/Aug/08 31/Aug/09 31/Aug/10 31/Dec/10 31/Aug/11 28/Feb/07 29/Feb/08 28/Feb/09 28/Feb/10 28/Feb/11 30/Apr/07 30/Apr/08 30/Apr/09 30/Apr/10 30/Apr/11 31/Oct/07 31/Oct/08 31/Oct/09 31/Oct/10 31/Oct/11 30/Jun/07 30/Jun/08 30/Jun/09 30/Jun/10 30/Jun/11 -3000 6 All data from www. financial services and insurance. We expect that by 2013 commercial real estate demand is also likely to reach new highs. and telecom in most cities. still increase was seen in absorption and slight improvement was evident in rentals in the later part of 2010. pharmaceuticals.

The trading activity on the Index has reduced significantly from 2009 onwards after the recessional peak in late 2008’s which sustained itself through 2009. CNX Infra 2000 1800 6000 Turnover and shares traded (Scaled) 1600 1400 1200 1000 800 600 400 -4000 200 0 06/May/07 06/May/08 06/May/09 06/May/10 06/May/11 06/Jan/07 06/Jan/08 06/Jan/09 06/Jan/10 06/Mar/07 06/Mar/08 06/Mar/09 06/Mar/10 06/Jan/11 06/Mar/11 06/Jul/07 06/Jul/08 06/Jul/09 06/Jul/10 06/Nov/06 06/Nov/07 06/Nov/08 06/Nov/09 06/Nov/10 06/Sep/07 06/Sep/08 06/Sep/09 06/Sep/10 06/Jul/11 06/Sep/11 -6000 0 -2000 4000 2000 Returns (Scaled) 8000 Shares Traded (Infra) Turnover (Infra) Returns (Infra) The broader index CNX Infra is closely correlated to the CNX Realty index. The correlation between the returns in these sectors is very high. Larsen & Tubro. The overall returns since the inception of this index have been -73%.. Reliance Infra. GMR and Lanco. The volatility in returns has been on a higher side (3.The plot indicates that the returns have not been very high in this sector for the investors. The returns for the 8 biggest infrastructure and real estate developers are presented in the chart below. This indicates that the real estate sector and the overall infrastructure of the country have co-moved in the past 5 years. . Unitech. Godrej. It is evident from the graph that the industry has been hit hard by the recession with the returns now being very low (late 2009 -2011). whereas the averaged daily returns have been -0. The companies considered were .DLF.05 %.5%) which is evident from the large fluctuations in the above graph. It was observed that the average returns were negative for half of the total four year period. HDIL.

The latest budget aims at investing only 23 % (about half of that of China) in infrastructure. Chinese telecommunication infrastructure has rapidly outgrown that of India. 2. the extraordinary stock of human capital in the country still engages in IT-Industry. India on the other-hand has given relatively low priority to this sector ion the past few years.their savings – in developing a world class infrastructure.5 Trillion Dollars) and hence the investment on an absolute basis is even lower. China has invested heavily during the 1990s. As a result.2011) 40 30 20 10 Series1 0 -10 -20 -30 Comparing the infrastructure with China – 1.Returns (2007. China has displayed this with extraordinary growth in the automobile and hardware industry – a dream realised due to the world-class infrastructure backed with the cheap human capital. China has used its domestic savings in infrastructure development in the past 10 – 15 years. The per capita usage of cellular phones and internet is much higher for China compared to India. Infrastructure implies better technology absorption: Infrastructure is a key determinant of the level of technology absorption and the production capacity of the nation. and leads in . They have employed almost 40 % of GDP . It should be noted that the GDP of China is almost 5 times compared to India ($5. It works like a feed-back mechanism where-in a capital invested in infrastructure development will ultimately lead to better usage of technology.

India is also an exporter of iron and steel. 3. The involvement of government agencies has not been a boon in all cases. The Birds nest was one of the pioneering works in the field of Civil engineering. 7 8 The Internet in India and China. along with being the biggest exporter.46 mainlines/100 capita versus 1. Mumbai . 5. Furthermore the government’s plan to invest US $1 Trillion in the 12th plan should encourage this sustained growth. 3. Macro-Economy and Infrastructure – 1. Indicators of Infrastructure investment: The steel and iron industry is an important indicator of the level of investment and infrastructure development in the country. in 1996. the 2008 downturn China led the recovery of the steel industry.54 in India. equipment as well as specialization acts as a deterrent to this industry. 6. Efficiently and artistically done with full government support. the PPP model has been selected as the favoured method of investment in the infra sector and has set the target for investment at an ambitious US $150 billion during 2011-12. this may be compared to the Stadium built for the commonwealth games in India which was dogged by corruption. India was one of the few countries isolated from it and grew at a healthy rate of 8. but 7 it has helped regardless. This rapid build up in China requires outside financing. Technology & Human Resources: The lack of availability of technology related to materials. and China has been much more successful than India in attracting direct foreign investment.794 billion in 1996 while China invested $13. Larry Press. Investment policies: According to Deputy Chairman of the Planning Commission. Montek Singh Ahluwalia. India's legendary bureaucracy also cuts efficiency. Efficiency: The Chinese also operate their telecommunication system more efficiently.038 billion.6%. Adding to the problem is the fact that there is a lack of adequately qualified skilled labour and skilled engineers and remains a key concern in this sector. Indian infrastructure firms on vented their frustration during a World Economic Forum event what they saw as needless brakes on growth in a sector key to the 8 country's prosperity. After. Today China has a share of almost 40 % of the global steel production. however it is being done at the cost of development of modern infrastructure. While increasing the total funding. 4. Foreign Direct Investment: To increase funding via the FDI route. Economic times – recently concluded WEF meeting.[7] The Chinese may not have been thinking of the Internet when they decided to invest in telecommunication infrastructure. Government paralysis. China has been a leader in the production and export of Iron and steel. Mr. The gap has continued to widen since 1996. with the rates being raised 11 times in the past 16 months. The government’s projection for next year’s growth at 9% shows a positive trend and should fuel further demand. Chinese tele-density was 4. 4.virtually all indicators. Economic Growth: Economic Growth is the major contributor to the growth of infrastructure. indicating the heavy resource employment in infrastructure. The government has been unable to contain these rates which have at times skyrocketed. With most of the developed world crippled by recession. this relaxation comes as a challenge to Domestic Players who now will have to compete at a global level. bureaucratic stonewalling of projects and corruption. foster et al. delays and several on-site accidents. This has created an opportunity for foreign players to be part of the indian growth story. For example. Inflation: Inflation has been a continuous sword hanging over the government’s neck for the past 2 years. the government has announced the National PPP policy and has also liberalised its policies. as India's capital expenditure for telecommunication was $1. Internal Security: Lack of internal Security remains a constant concern with there being so many issues related to the problem of the people and their protests for the same which leads to inordinate delays in the timeline of the projects especially in the ‘Red Corridor’ (Naxal Affected Areas) 2. This has led to an increase in the rates of loans.

Threat (5) .Regulations have been made more lucrative with the national PPP policy (2011).Regulatory confusion. have led to delay in projects.The country has been unable to cope with the natural calamities and risk mitigation for the same. . This in turn corresponds to lower margins for the private players as well which has impacted potential investors and their ability to raise funding for infrastructure projects. Weakness (5) . . a big demand mismatch is seen. delays absorption of funds and deters investors.The demand has been often over-estimated (Road projects).Land clearance issues are a major threat. . . .Stable government and policies with regards to this sector.around 36% in the 11th plan.A weak (and old) land acquistion act & the government's will to resolve this key issue.The 12th five year plan will aim to increase the investment in the sector to US$ 1 trn of which 50% will come from private investors. .Govt. It has a chance to learn from the past and adopt global best practices in its aims of meeting this challenge. the Indian infrastructure is a sector that is here to stay and provides ample opportunities for both public as well as the private sector to be responsible stakeholders in its growth. . poor planning has led to losses. A SWOT analysis of the infrastructure sector is outlined: Strengths (3) .An over-bureaucratic system . With the government placing a huge emphasis on the priority of this sector. . The infrastructure industry in India is poised for significant growth over the long term.Lower levels of mechanisms SWOT Opportunity (4) . . The business environment with the bureaucracy and the red tape which lead to further delays has worsened this condition further.The population places a huge burden on the infrastructure.Lack of structured regulatory and policy framework. . India today stands on a crossroad.Growing private sector participation . Radical approach in the latest plan. or well defined operating and financial regulations. it has become difficult for private players to generate funds. This can increase operational efficiency of the sector. . Financing: With rising levels of debt and interest rates skyrocketing. is keen to play a major role and promote growth in the sector .7. especially when it comed to ports.Strong population growth and a growing economy are fuelling demands for a better infrastructure. . . 38 infrastructure Private Equity funds currently looking at assets and investments in India.Low levels of domestic expertise.The investments are being directed to the country in form of FDI/FII.