Real Estate Including Housing for All by 2022 to Boost Construction Equipment Demand
It goes without saying that real estate market is the major growth driver for the Earthmoving and Construction Equipment (ECE) industry. If we go by the numbers, then the real estate market is estimated to grow to US$180 billion by 2020 driven by demand mainly from residential sector. Thus, it is quite obvious that the construction equipment segment in the country is also bound to grow. In fact, the real estate industry is touted to be a major game-changer for the construction equipment industry in India.
Further, with the government undertaking the development of 98 cities for the Smart Cities project across the country and launching the ‘Housing for All by 2022’ scheme and many such plans, the real estate sector and in turn the ECE market of the country is set to see the silver lining. Since, the real estate sector would be increasingly demanding advanced mechanisation, equipment and systems so as to achieve better quality of work along with timely completion of projects, it will bring about a huge change in the ECE segment.
Housing for All by 2022 to increase ECE demand
Particularly affordable housing growth will positively impact the ECE industry. This is because acknowledging the importance of housing issue in the country, government has launched a massive campaign that promises to provide housing to all its citizens by the year 2022. As per the estimates, the vision would require development of about 11 crore houses with investments of over USD 2 trillion. This would directly create huge demand for ECE like backhoe loaders, excavators etc., and construction materials.
Taking a step further government has proposed infrastructure status for affordable housing in the Union Budget 2017-2018, thereby, enabling the banks to lend more money to affordable housing projects under the infrastructure category. Also, the allocation for Prime Minister Awas Yojana has been increased from Rs 15,000 crore to Rs 23,000 crore so as to bring the country closer to realising the Housing for All mission by 2022. In addition, the cabinet has extended tenure of loans under Credit Linked Subsidy Scheme of Pradhan Mantri Awas Yojana from 15 to 20 years. Thus, these moves are expected to boost the volume of construction activity across the country and impact ECE demand.
Other real estate factors to boost ECE demand
1. In the Union Budget 2017-2018, Government has extended the 100 per cent tax deduction scheme for affordable housing projects approved between June 2016 and March 2019, by two more years till 2021.
2. In the same budget, it stated that by 2019, one crore houses will be built in rural India for the homeless and those living in ‘kaccha’ houses.
3. The Indian Government also targets of investing about $377 billion in infrastructure by 2019. As a result, Indian construction equipment revenues are expected to cross $23 billion.
Overall, the Union Budget 2017-2018 has done its best to infuse confidence in the real estate market by unveiling a slew of measures to boost its growth. Further, the massive push for improvement in infrastructure including outlay for roads, railways and development of smaller airports to improve connectivity and other few developments are touted to have a positive impact on the real estate sector in the long run. Thus, the ECE segment has all the reasons to smile.
Bright future of ECE ahead
In 2015, emerging markets including India constituted 50 per cent of the total construction activities worldwide. However, the construction projects/activities spread across India, slowed down due to demonetisation of high currency notes in the last quarter of 2016 and early quarter of 2017. But now these projects are expected to gain speed again. Thus, the ECE sector is set to benefit from such real estate developments. In fact, it would not be wrong to say that other than the infrastructure sector, it is the real estate segment that is creating sustained demand for ECE in the country.
What more? As per the estimates, India expects a drastic 200 per cent expansion in the real estate segment as only one third of the buildings that it is targeting to built till 2030, has been constructed. Thus the overall Indian construction industry is expected to remain buoyant and with the government’s focus on creating world-class infrastructure, Smart Cities and Housing for All in the country, India is definitely expected to witness a spurt in construction activity and ECE demand.
If we go by the numbers then, the Asia-Pacific region is believed to register the highest growth in the ECE segment from 2016 to 2021 with India projected to be the fastest-growing market in the region. All the star players in the ECE segment of the country like Mahindra Construction Equipment (MCE) are gearing up to embrace this growth with grace by diversifying its range of offerings, introducing newer variants of the existing line-up and launching more innovative and environment-friendly products and services for the customers.