Doc.

No: RICS-SBE/001/SOC/S006/R01
Revised On: 30-11-2018

ASSIGNMENT – 2
APPLICATION AND ANALYSIS OF
ECONOMICS ON CONSTRUCTION
SECTOR
Contribution of the construction sector/Real estate
towards the growth of the Indian economy.

► Construction Industry/Real Estate is the second largest sector in the

Indian Economy.

► Providing 41 million employments in the last half-decade.

► Contribution to India by sharing 7.4% GDP (Groos Domestic Products).

The trends of the construction industry/Real
Estate over the period of 2010 to 2018.

► Sector gets a definite rise in the share in GDP with some disturbances.

► Share approx. 8.4% in total GDP of India with 670,778 crore contribution
in FY2012-11 to GDP.

► GDP share in 2019 at its hight of 9%.

Disturbance to the growth of
construction sector/ real estate

► Scams in infra projects during 2012-13.

► Global recession during 2014.

► Demonetization in 2016.

► Tax reformation(GST) in 2017.

Initiatives by the government for
construction sector/ real estate

► Allowing 100% FDI, resulting investment received from FY2000-17 stood

at the US $24.67 billion.

► The government takes the projects on PPP (Public-Private Partnership)

basis.
Sales

0
Private investment
34
Public investment

66
PERFORMANCE OF INDIAN CONSTRUCTION
INDUSTRY CONCERNING DIFFERENT SECTORS
PERFORMANCE OF INDIAN CONSTRUCTION
INDUSTRY CONCERNING DIFFERENT SECTORS

REAL ESTATE SECTOR

► Growth of real estate sector is expected to be US$ 1 trillion in India by

2030. According to current statistics the real estate sector will be
contributing 13% of India’s GDP by 2025. The government of India
(Union cabinet) in august 2015 has approved 100 smart city projects in
India
REAL ESTATE SECTOR

Investments and Developments in commercial real estate market

► The commercial real estate has been steady during the period 2016-
2019, however there was a decline in investments in the second half of
2018 and first half of 2019 due to the general elections.
► The Embassy Office Parks has raised Rs. 52 billion (US$ 775.66 million)
in September 2018 through India’s first Real Estate Investment Trust
(REIT) listing.
► America’s multinational private equity, asset management and financial
services firm Blackstone Group Inc. has acquired One Indiabulls in
Chennai from Indiabulls Real Estate for Rs. 900 Crores (US$ 136.9
million) in May 2018.
► DLF has bought 11.76 acres of land at a value of Rs. 15 billion (US$
2317 million) for further expansion in Gurugram, Haryana in February
2018.
REAL ESTATE SECTOR
REAL ESTATE SECTOR

Investments and Developments in residential real estate market

► The investments in the residential real estate market have declined drastically
since 2016 due to a slowdown in the sector according to Federation of Indian
Chambers of Commerce & Industry (FICCI).
► In the first six months of 2019 there were just about nine deals in the residential
real estate market compared to 41 deals in the last six months of 2016.
► An investment of about US$ 450 million was made in the residential sector in the
1st six months of 2019 compared to US$ 1.2 billion in the year before and US$ 2
billion in 2nd half of 2016.
PERFORMANCE OF INDIAN CONSTRUCTION
INDUSTRY CONCERNING DIFFERENT SECTORS

INFRASTRUCTURE SECTOR

► The infrastructure industry is the main driver of the Indian economy.

India is expected to become the 3rd largest construction market in the
world by 2022. India is ranked 44th of 167 countries in World Bank’s
logistics performance index (LPI) in 2018.
INFRASTRUCTURE SECTOR

Investments and Developments

► The infrastructure sector in India got
private equity and venture capital
investments worth US$ 1.97 billion in
2018.
► The Asian Infrastructure Investment
Bank (AIIB) has announced an
investment of US$ 200 million into the
National Investment & Infrastructure
Fund (NIIF) in June 2018.
► The Indian infrastructure sector saw 91
Mergers & Acquisitions deals worth US$
5.4 billion in 2017.
► The government of India has also
supported the infrastructure sector by
allocating Rs. 4.56 Lakh Crores (US$
63.20 billion).
Demand & Supply for Construction
Product

► We are here considering the details of demand and supply from 2016 to
2020. Cumulative Demand Cumulative Supply
(2016-2020) (in (2016-2020) (in
Thousands) Thousands)

LIG (5-15 Lakhs) 1982 25

MIG (15-50 Lakhs) 1057 647
HIG (50-100 Lakhs) 317 515
TOTAL 3356 1187
1.3- Total value of Output of
Construction Industry for past 3 Years

► India’s Construction Output in India arrived at the midpoint of 4.68 percent from
2005 until 2019.
► It gets lowered in the past 3 years.
► Because of the hike in price of labour and the cost of materials used as input in
the projects.
► The output also affected by the GST introduction in 2016 and the demonetization
in 2017.
Highway Construction
► Highway constructed in km during
the period of FY14-FY18
► In the last 3 years, the expansion
of the highway raises from 6061
km in 2016 to 9829 km in 2018
Railway Construction
► Number of Railway Overbridge
and under bridge constructed
during the period 2009 to 2014
was 762 and 2015 to 2016 was
1024.
Value of Public Sector Vs Private Sector

► The analysis of gross fixed capital formation (GFCF) spent in current

prices for the year 2017.
► By General Government

► By Public Corporations

► By Private Sector
1.4 S.W.O.T ANALYSIS
1.4 S.W.O.T ANALYSIS

•Employability in the Built Environment Sector

is High.

•Government Policies are Pro Built

Environment Sector (E.g. Smart Cities
Project)

•Increased F.D.I is a Booster for the Industry

1.4 S.W.O.T ANALYSIS

• Problems due to Corruption

W
• Low level of expertise, due to shortage
of skilled managers, engineers and
W labours

• Limited Use of New Technology.

W
1.4 S.W.O.T ANALYSIS

Govt. Policies
O

O
attracting Private Renewable
more housing Energy
investments projects are projects are
(e.g. Make in creating more in demand.
India, Smart construction
Cities opportunity
Projects etc.)
1.4 S.W.O.T ANALYSIS

Infrastructure Safety is one

of a major challenge faced
by Built Environment Sector.

Current Scenario of
Economy may affect the
Sector badly.

Coping with demands of

rising population.
GST (Goods and Service Tax)

► On 1 July 2017 biggest tax reform.

► GOODS AND SERVICE TAX (GST) ‘One Nation, One Market, One Tax’.

► Uniformity in taxation.
Effect of GST on the Indian construction sector (or
Built Environment).

► Transparency and Accountability

1. Minimizing the black money transactions
2. Fake billing
3. Tax evasion
► Cost of construction labor and material

The taxation on labor and service increased after GST which gives high
project cost.
Effect of GST on the Indian construction sector (or
Built Environment).

Cost of construction labour and material

Effect of GST on the Indian construction sector (or
Built Environment).

► Impact on contractors
1. Reduce the problem of paying various kinds
of taxes and duties like VAT, Service Tax,
state tax, etc.
2. Improves the margins.
3. Lot of paperwork and make the records of
various expenditures which helps for black
money transaction.
► Impact on Buyers
1. GST implication the total tax on buyers of
home increases by 6.6%.
2. Due to increases in the cost of materials the
cost of projects increases.
3. But affordable housing becomes cheaper
under GST.
Recent Development Planned By
Indian Government

► Smart cities
► National industrial corridor
► Affordable housing plan
► Ruler development housing plan
► Metro development
► RERA (Real Estate Regulation & Development Authority)
► Increasing foreign direct investment
 Smart Cities
► A city that incorporates information and
communication technologies to increase
the number of performances of urban city
services such as energy, transportation
and utilization in order to less use of
resources consumption, wastages and
overall cost is called smart city.
► INR 203314.6 crore has been allocated for
building 98 cities in 28 states and 7 union
territory. It is done under Ministry of
Housing and Urban affairs.
Affordable Housing for all
 It also termed as Pradhan Mantri Awas
Yojana (PMAY). It is an initiative taken by
Indian Government to provide affordable
houses to urban poor. The target is to
provide 20 million affordable houses by
31st March 2022. There are two parts of
this development plan :-
 Pradhan Mantri Awas Yojana – Urban
 Pradhan Mantri Awas Yojana Gramin -
Rural
National Industrial Corridor

► An industrial corridor is a package of

infrastructure spending allocated to a
specific geographical area, with the intent
to stimulate industrial development.
► Indian industrial corridors consists of :-
► Delhi Mumbai Industrial Corridor

► Chennai Bangalore Industrial Corridor

► Mumbai Bangalore Industrial Corridor

► Amritsar Delhi Kolkata Industrial

Corridor
► Udhana Palsana Industrial Corridor

► East Coast Industrial Corridor

► Kochi Bangalore Industrial Corridor

RERA (Real Estate Regulation & Development
Authority)

► The Government of India enacted the Real Estate (Regulation and Development) Act 2016 on
26th March 2016 and all its provisions came into effect, from May 1, 2017.
► It intends to protect the interests of home buyers and enhance transparency in the real estate
sector.
► It brings better accountability, provided that states do not dilute the provisions and spirit of the
central act.
► Projects which haven’t received Completion Certificate should do their registration within 3
months from the date of notification.
► Will receive Reg. No. & login within 30 days. Till registration advertise, market, sell etc is strictly
prohibited.
► Have to submit information related to Project & Promoter to the authority.
REFERENCES

► https://tradingeconomics.com/india/employment-rate
► https://www.equitymaster.com/research-it/sector-info/construction/Construction-Sector-Analysis-
Report-dec2010.asp
► AStudyofEnablingFactorsAffectingConstructionProductivityinIndianscenario.pdf
► https://www.ibef.org/
► http://ijrpublisher.com/gallery/226-november-643.pdf
► http://mahasagarpublications.blogspot.com/2014/04/swot-analysis-of-infrastructure.html
► https://taxguru.in/tag/fdi/
► https://up-rera.in/index
► http://smartcities.gov.in/content/
► https://dipp.gov.in/programmes-and-schemes/infrastructure/industrial-corridors
► https://india.uitp.org/articles/india-investing-metro-infrastructure
► https://saylordotorg.github.io/text_macroeconomics-theory-through-applications/s08-01-
housing-supply-and-demand.html
► https://economictimes.indiatimes.com/wealth/real-estate/housing-demand-across-top-8-cities-
during-2016-2020-estimated-at-4-2-million-units-report/articleshow/55894124.cms