Construction

Summary
  • Infrastructure plays a huge role in propelling other industries and India’s overall development. The government, therefore, focuses on the development of infrastructure and construction services through focused policies such as open FDI norms, large budget allocation to the infrastructure sector, smart cities mission, etc. 1
  • Investment of about INR 2 lakh cr has been proposed by 99 cities under the Smart City initiative.2
  • The government’s flagship mission Pradhan Mantri Awas Yojana (Urban) – PMAY (U) launched in June 2015 aims to provide housing for all in urban areas by the year 2022. 13
  • Construction of 56,368 houses have been approved under PMAY-U at 53rd Central Sanctioning and Monitoring Committee Meeting.
  • Department for Promotion of Industry and Internal Trade, Cement production increased by 2.8per cent in October 2020 over October 2019.38
  • The overall investment in Urban transformation is up by 627% during the last 6 years of 2014-2021 as compared to the period between 2004-2014.42 
Reasons to Invest
  • Construction industry in India will remain buoyant due to increased demand from real estate and infrastructure projects.
  • Indian Real Estate sector expected to reach a market size of USD 1 Tn by 2030. Its contribution to the country’s GDP is expected to be approximately 13% by 2025.4
  • The share of the urban population is expected to be 50% of the total population by 2050.5 
  • General operation guidelines for registration of units under new central sector scheme for the industrial development of Jammu and Kashmir.

 

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Recent Announcements

 

01st April 2021: General Operational Guidelines for Registration of Units under New Central Sector Scheme for Industrial Development of Jammu & Kashmir.

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23rd March 2021: Cabinet approves Memorandum of Cooperation (MoC) signed between India and Japan in the field of Water Resources.

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09th March 2021: PM inauguratesMaitri Setu’ between India and Bangladesh and laid the foundation stone of multiple infrastructure projects in Tripura.

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25th February 2021: PM’s address at the launch of multiple infrastructure projects in Coimbatore, Tamil Nadu.

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25th February 2021: The Government has issued new Scheme which is called as New Central Sector Scheme for Industrial Development of Jammu & Kashmir.

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14th February 2021: Udyog Manthan | Industry-led expert panel discussions on Construction

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Statistics
  • The Gross Value Added (GVA at Current Prices) by the Construction Sector in India is estimated to be about USD 192 Bn in 2019-20 as compared to USD 183.5 Bn in 2018-19.6
  • Investments valued at USD 965.5 Mn will be required by the infrastructure sector by 2040.7
Growth Drivers
  • In the Virtual Global Investor Roundtable, the Hon'ble Prime Minister expressed that India has an ambitious plan to invest $ 1.5 tn under the  National Infrastructure Pipeline.
FDI Policy
  • 100% FDI through the automatic route is permitted in the following construction (development) projects:8
    • Development of townships
    • Construction of residential/commercial premises
    • Construction of roads or bridges
    • Construction of hotels, resorts
    • Construction of hospitals, educational institutions
    • Construction of recreational facilities
    • Construction of city and regional level infrastructure
  • FDI Limit for real estate projects within Special Economic Zones (SEZs) raised to 100%.
  • FDI limit for industrial parks under the automatic entry route is 100%. 9
  • The cumulative FDI equity inflow in the Construction industry is USD 23,995.41 mn during the period April 2000 to December 2020. This constitutes 4.60% of the total FDI inflow received across sectors.
  • The construction (Infrastructure) sector has a total FDI equity inflow of (13.37%).

Read more about Foreign Direct Investment Policy in India >

Sector Policy
  •  METRO NEO- The metro rail system being developed for mass transit corridors having a Peak Hour Peak Direction Traffic (PHPDT) upto 8000 with AW3 loading.37
  • On 18th November 2020, under the Special Micro-Credit Facility Scheme more than 12 lakh loans were sanctioned and about 5.35 lakh loans disbursed.
  • A sum of Rs 18000 cr is being provided for PMAY- Urban. This will help ground 12 Lakh houses and complete 18 Lakh houses, create additional 78 Lakh jobs.39
  • Around 1.1 cr houses approved and the construction of 1,68,606 new houses approved under PMAY(U) that focuses on completion & delivery of houses to beneficiaries.
  • MOHUA launches Socio-Economic Profiling of PM SVANidhi beneficiaries. Under PM Street Vendor's AtmaNirbhar Nidhi (PM SVANidhi) INR 66.55 cr has been released till 30th September 2020.42 
Projects

Smart Cities Mission

  • The objective of the Smart Cities Mission is to promote cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment and application of ‘Smart’ solutions.10
  • As on 25th June 2020, the value of all completed projects is more than INR 27,000 cr, the value of tendered projects is over INR 1,66,000 cr and the value of work orders issued is about INR 1,25,000 cr. 21
  • The core infrastructure elements in a smart city would include:11
    1. Adequate water supply
    2. Assured electricity supply
    3. Sanitation, including solid waste management
    4. Efficient urban mobility and public transport
    5. Affordable housing, especially for the poor
    6. Robust IT connectivity and digitalization
    7. Good governance, especially e-Governance and citizen participation
    8. Sustainable environment
    9. Safety and security of citizens, particularly women, children and the elderly
    10. Health and education
  • Global Housing Technology Challenge-India (GHTC-I) aims to bring the most innovative construction technologies to India through a competitive platform. It aims to give a boost through the development of domestic technological research, and building platforms for knowledge sharing and networking across the sector.12 

Swachh Bharat Mission

  • The Swachh Bharat Mission (SBM) is a cleanliness campaign by the Government of India.14
  • The objectives of the SBM are:
    1. Elimination of open defecation
    2. Eradication of Manual Scavenging
    3. Modern and Scientific Municipal Solid Waste Management
    4. To effect behavioral change regarding healthy sanitation practices
    5. Generate awareness about sanitation and its linkage with public health
    6. Capacity augmentation for Urban Local Bodies (ULBs)
    7. Create an enabling environment for private sector participation in Capex (capital expenditure) and Opex (operation and maintenance).15
  • The SBM has been divided into two categories – Urban and Gramin (rural). The Ministry of Housing and Urban Affairs implements it in urban areas and the Ministry of Drinking Water and Sanitation implements it in rural areas. The above-mentioned ministries work with all other union ministries, state governments, local institutions, NGOs, faith organizations, media and other stakeholders to ensure the wide and proper implementation of the SBM.16
  • Rural sanitation coverage has increased from 38.7% in 2014 to 96.9% as of 5 December 2018.17 On the urban front, 3,574 cities have been declared defection free, 5.4 mn plus individual toilets have been constructed, 464,250 community & public toilets have been constructed and 88.4 MW of waste has been converted to energy.18
  • In a big boost to the SBM (Gramin), the World Bank, in December 2015, approved a USD 1.5 Bn loan for the SBM Support Operation project. The World Bank is also providing parallel assistance of USD 25 Mn as technical assistance to build the capacity of select state governments in implementing community-led behavioural change programmes targeting social norms to help ensure widespread usage of toilets by rural households.19

Heritage City Development and Augmentation Yojana (HRIDAY)

  • The National Heritage City Development and Augmentation Yojana (HRIDAY) has been launched to preserve and revitalise the soul of Indian heritage cities to reflect the city’s unique character by encouraging aesthetically appealing, accessible, informative and a secure environment.12 cities have been identified to implement the program – Amjer, Amaravati, Amritsar, Badami, Dwaraka, Gaya, Kancheepuram, Mathura, Puri, Varanasi, Velankanni and Warangal. 20
  • As of December 2018, 20 projects amounting to USD 20 Mn have been completed in in Ajmer, Amaravati, Amritsar, Badami, Dwaraka, Puri and Varanasi.22  For more details, please refer to HRIDAY.
  • GST Regime Implications - Under the GST regime (revised), promoters are to pay 1% (without input tax credit) GST in case of affordable houses and 5% (without input tax credit) on construction of houses other than affordable houses.23 Commercial properties will continue at the same GST rate of 12% with input tax credit.
  • GST is not applicable to completed and ready-to-move-in projects, as there are no indirect taxes applicable in the sale of such properties.
  • The Real Estate Regulation and Development Act (RERA), 2016, set up in November 2016, aims to reform the real estate sector in India by encouraging greater transparency, citizen centricity, accountability and financial discipline.24 The act will also protect consumers by creating an online system for information sharing so that a mutual trust can develop between developers and buyers and to facilitate timely completion of projects.

Pradhan Mantri Awas Yojana (Urban – Housing for All)

  • The Pradhan Mantra Awas Yojana (PMAY) aims to provide housing for all by 2022 and is being implemented from June 2015. PMAY provides central assistance to Urban Local Bodies (ULBs) and other implementing agencies through States/UTs for in-situ rehabilitation of existing slum dwellers using land as a resource with private participation; credit-linked subsidy, affordable housing in partnership and subsidy for beneficiary-led individual house construction/enhancement.25
  • The total investment (as of December 2018) involved in the PMAY (Urban) is USD 50 Bn.26
  • Under the PMAY-G, an amount of INR 1351.11 cr has been released during the month of November 2020.40
  • Till 19th January 2021, 1.26 cr houses have already been built across the country under the scheme.44

Atal Mission for Rejuvenation and Urban Transformation (AMRUT)

  • The purpose of the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) is to:
    1. Ensure that every household has access to a tap with assured supply of water and a sewerage connection
    2. Increase the amenity value of cities by developing greenery and well maintained open spaces (e.g. parks)
    3. Reduce pollution by switching to public transport or constructing facilities for non-motorized transport
  • USD 858 Mn was the budget allocation in the Union Budget 2018-19 for the AMRUT scheme.27
  • Many of the government schemes related to construction converge in their goals, although the path they choose may be different. There is a strong link between AMRUT and the Smart Cities mission – while AMRUT aims to achieve urban transformation using the project-based approach, the Smart Cities Mission follows an area-based strategy.28

Under the Pradhan Mantri Gram Sadak Yojana (PMGSY), in October 2020, a total of 355 roads works of 2267km and 71 bridges works have been completed under various verticles of PMGSY. 40

Investment Opportunities

Key Highlights from Union Budget 2020-21 

  • Total allocation to the Ministry of Housing and Urban Development stands at INR 50,039 cr. 29
  • Total budget allocation towards major centrally sponsored schemes is as follows: 30
    • Pradhan Mantri Awas Yojana (PMUY): INR 27,500 cr.
    • Urban Rejuvenation Mission (AMRUT and Smart Cities Mission): INR 13,750 cr.
    • Swachh Bharat Mission (Urban): INR 2,300 cr.
    • Swachh Bharat Mission (Gramin): INR 9,994 cr.

Central sector schemes providing financial assistance

  • Atmanirbhar Bharat Schemes
    • Affordable Rental Housing Complexes (ARHCs): In order to cater to the housing needs for migrant workers which arose due to the COVID-19 pandemic, the Ministry of Housing & Urban Affairs has initiated the Affordable Rental Housing Complexes (ARHCs) scheme. It is a sub-scheme under Pradhan Mantri AWAS Yojana- Urban (PMAY-U) that will ensure a decent living environment to migrant workers in urban cities. 31
    • PM Street Vendor's AtmaNirbhar Nidhi (PM SVANidhi): To provide financial assistance to various street vendors hit by the COVID-19 pandemic, the Ministry of Housing & Urban Affairs has launched the PM SVANidhi scheme. The scheme will provide working capital to street vendors, incentivize regular repayments and reward digital transactions. 32
  • North Eastern Region Urban Development Programme (NERUDP): The central sector programme is being implemented by the Ministry of Urban Development (MoUD). Financial aid (70% of the cost) is being provided by the Asian Development Bank in the form of loan to the government for development of infrastructure in north eastern cities. 33, 34

 

Explore Government policies/schemes in Construction sector >

Investment Opportunities
  • Construction development in residential, retail, commercial and hospitality sectors, development of townships
  • Construction of roads, bridges, hotels, resorts
  • Technologies and solutions for smart, sustainable and connected cities and integrated townships
  • Technologies for the promotion of low cost and affordable housing
  • Green building solutions
  • Sustainable and environmentally friendly building materials.
  • Training and skill development of construction sector workers
  • Urban water supply, urban sewerage and sewage treatment. 

 

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Foreign Investors
  • Hines (USA)
  • Veolia (France)
  • Ascendas (Singapore)
  • Aqualyng (Norway)
  • The Trump Organization (USA)
  • Alstom (France)
  • GIZ (Germany)
Agencies
Key Achievements
  • Hon’ble Minister Shri Hardeep Singh Puri launched three initiatives, namely, the Nurturing Neighborhoods Challenge focusing on shaping cities for young children and their families; the Data Maturity Assessment Framework to evaluate data ecosystems of cities, and an on-line training programme for City Data Officers (CDOs) of 100 Smart Cities.35
  • In the last five years, construction sector, as a part of manufacturing contributed an average of 8 percent to the overall Gross Value Added (GVA).36 
  • During the month of October 2020, about 23.53 lakh households have been provided with tap water connection.41 
  • Jal Jeevan Mission reaches milestone of 3.5 Crore rural households tap water connections.
Sources
  1. "India Services Portal, Department of Commerce, Ministry of Commerce & Industry”, Sector Overview - Construction and Related Engineering Services, https://www.indiaservices.in/construction 
  2. "Ministry of Housing and Urban Affairs", Schemes/ Programmes, Smart Cities, http://mohua.gov.in/cms/smart-cities.php
  3. Factsheet on FDI - April 2000 to December 2020Department for Promotion of Industry and Internal Trade,  https://dipp.gov.in/sites/default/files/FDI%20Factsheet%20December%2020.pdf
  4. “India Services Portal, Department of Commerce, Ministry of Commerce & Industry”, Sector Overview - Construction and Related Engineering Services, https://www.indiaservices.in/construction
  5. “Ministry of Housing and Urban Affairs”, Standard Operating Procedures for Cleaning Sewers and Septic Tanks, http://mohua.gov.in/upload/uploadfiles/files/AMRUT%20SOP%20Book%20Final.pdf
  6. “First Advance Estimates of National Income, 2019-20” Ministry of Statistics & Programme Implementation, PIB website, https://pib.gov.in/Pressreleaseshare.aspx?PRID=1598643
  7. India Infrastructure Sector 2019-23, EMIS, https://www.emis.com/php/store/reports/IN/India_Construction_Sector_Report_20192023_en_661610067.html
  8. “Department for Promotion of Industry and Internal Trade”, Consolidated FDI Policy, https://dipp.gov.in/sites/default/files/CFPC_2017_FINAL_RELEASED_28.8.17_1.pdf
  9. “Department for Promotion of Industry and Internal Trade”, Consolidated FDI Policy, https://dipp.gov.in/sites/default/files/CFPC_2017_FINAL_RELEASED_28.8.17_1.pdf
  10. “Smart Cities Mission”, Ministry of Housing and Urban Affairs,  What is Smart City, http://smartcities.gov.in/upload/uploadfiles/files/What%20is%20Smart%20City.pdf
  11. “Smart Cities Mission”, Ministry of Housing and Urban Affairs,  What is Smart City, http://smartcities.gov.in/upload/uploadfiles/files/What%20is%20Smart%20City.pdf
  12. ”Ministry of Housing and Urban Affairs”, Global Housing Technology Challenge -India, https://ghtc-india.gov.in/Content/ConceptNote_on_GHTC-India.pdf
  13. PMAY, https://pmaymis.gov.in/
  14. “PM India”, Major Initiatives, Swachh Bharat Abhiyan, https://www.pmindia.gov.in/en/major_initiatives/swachh-bharat-abhiyan/
  15. “Ministry of Housing and Urban Affairs”, Swachh Bharat Mission, http://mohua.gov.in/cms/swachh-bharat-mission.php
  16. “Ministry of Drinking Water and Sanitation”, Year End Review-2018: Ministry of Drinking Water and Sanitation Swachh Bharat Mission, http://pibarchive.nic.in/newsite/PrintRelease.aspx?relid=186600
  17. “Ministry of Drinking Water and Sanitation”, Year End Review-2018: Ministry of Drinking Water and Sanitation Swachh Bharat Mission, http://pibarchive.nic.in/newsite/PrintRelease.aspx?relid=186600
  18. “Ministry of Housing and Urban Affairs”, Smart Bharat Mission Urban, http://swachhbharaturban.gov.in/
  19. “World Bank”, World Bank Approves USD 1.5 Bn to Support India’s Universal Sanitation Initiatives, http://www.worldbank.org/en/news/press-release/2015/12/15/world-bank-approves-usd-1point5-billion-support-india-universal-sanitation-initiatives
  20. “Ministry of Housing and Urban Affairs”, HRIDAY, http://mohua.gov.in/cms/hariday.php
  21. "5th Anniversary of Urban Missions", Ministry of Housing and Urban Affairs, PIB, https://pib.gov.in/PressReleasePage.aspx?PRID=1634268 
  22. “Ministry of Housing and Urban Affairs”, HRIDAY, http://mohua.gov.in/cms/hariday.php
  23. “Ministry of Finance”, Decisions taken by the GST Council in the 34th meeting held on 19th March, 2019 regarding GST rate on real estate sector, http://pibarchive.nic.in/newsite/PrintRelease.aspx?relid=189462
  24. “Ministry of Housing and Urban Development”, Real Estate Regulation and Development Act -2016, http://mohua.gov.in/cms/real-estate-regulation-and-development-act-2016.php
  25. “Ministry of Housing and Urban Poverty Alleviation”, Year Ender-6-PMAY-Ministry of Housing & Urban Affairs, http://pibarchive.nic.in/newsite/PrintRelease.aspx?relid=186831
  26. “Ministry of Housing and Urban Poverty Alleviation”, Year Ender-6-PMAY-Ministry of Housing & Urban Affairs, http://pibarchive.nic.in/newsite/PrintRelease.aspx?relid=186831
  27. ”Ministry of Housing and Urban Poverty Alleviation”, Rs 41,765 crores allocated for MOHUA for 2018-19 – An Increase of Nearly 3% over las5 year’s budget, http://pibarchive.nic.in/newsite/PrintRelease.aspx?relid=176273
  28. “Ministry of Housing and Urban Affairs” Convergence, http://smartcities.gov.in/content/innerpage/convergence-sp.php
  29. Expenditure Budget Profile - Ministry of Housing and Urban Affairs, Union Budget website, https://www.indiabudget.gov.in/doc/eb/sbe57.pdf
  30. Expenditure Budget Profile - Centrally Sponsored Schemes, Union Budget website, https://www.indiabudget.gov.in/doc/eb/stat4a.pdf
  31. ARHC, Ministry of Housing and Urban Affairs, http://arhc.mohua.gov.in/
  32. PM SVANidhi, Ministry of Housing and Urban Affairs, https://www.pmsvanidhi.mohua.gov.in/Home/Schemes
  33. NERUDP, Ministry of Housing and Urban Affairs, http://mohua.gov.in/cms/nerudp.php
  34. NERUDP, https://nerudp.nic.in/index.html
  35. PIB RELEASE, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1670032
  36. Monthly Economic Review, Department of Economic affairs, https://dea.gov.in/sites/default/files/October%202020.pdf
  37. “Ministry of Housing and Urban Affairs”, http://mohua.gov.in/upload/whatsnew/5fa52ec5702e2Standard+specifications+of+Metro+Neo-2%20(1).pdf
  38. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1676471
  39. PIB Release, https://pib.gov.in/PressReleasePage.aspx?PRID=1672321
  40. Monthly Report, http://mohua.gov.in/upload/whatsnew/5fa1431c29e10Cab_Sept.pdf
  41. Monthly Report, https://jalshakti-ddws.gov.in/sites/default/files/monthly_summary_October_2020_eng.pdf
  42. “Ministry of Housing and Urban Affairs”, http://mohua.gov.in/upload/whatsnew/5fa1431c29e10Cab_Sept.pdf
  43. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1687573
  44. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1690002

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