A building materials goldmine? India's strong market seeing growth
Published on 22/05/2015
Now is a great time to attempt to break into India's building materials market. The nation has launched a number of ambitious building schemes in recent months, from 'smart cities' to housing projects, all of which need supplies of cement, ceramics, windows and other construction materials.
This has led to a period of strength for the Indian construction materials market that looks set to grow over the coming months. As such, it is a great time for overseas firms to get involved with this vibrant industry. India is very open to trade and investment from international companies, which could make it a very lucrative option for building materials businesses. Late last year, India's Cabinet moved to relax foreign direct investment rules governing the construction sector, easing restrictions around minimum built-up areas, capital requirement and exit norms.
If you are looking to expand your construction materials company overseas, here are several reasons to get involved with the growing Indian market:
Major projects causing growth
One of the main reasons for the growth of demand for construction materials in India is the sudden expansion of major projects. Prime minister Narendra Modi has promised a number of huge schemes - including industrial parks, and technological business and residential hubs known as smart cities - which in turn is leading more international firms to build in India.
One of the best examples of this is Google, which has just announced it is planning to build a 'corporate campus' in Hyderabad. Google currently already has four offices in India, however this one will be the largest by a long way. In fact, it will be the biggest Google campus outside the US.
The facility, which will be located in the region of Gachibowli, will be built on 7.2 acres of land. A statement from the Telangana government said: "Google expects the facility to be complete and fully operational in about four years and is supposed to start before the summer of 2019." Google confirmed that construction will begin in 2016 after 12 months of planning, and last 2.5 years.
Image credit: Sebastian Bergmann (originally posted to Flickr as Google Campus) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons
Companies expanding in India
Major projects such as Google's, and the demand for construction materials they are creating, have led to a number of companies being able to expand in India. For example, Komatsu - a firm that manufactures construction machinery - has just opened a new factory on the outskirts of Chennai.
The facility will be used to create hydraulic excavators for use in India's many construction projects. A statement released by the company said: "Komatsu believes that India is one of the leading markets, with promising growth in the mid to long terms for construction equipment, and regards its business in India in a long-range perspective."
Image credit: JLPC / Wikimedia Commons, via Wikimedia Commons
Meanwhile, Mitsubishi Electric Corporation has announced it will be constructing its own new factory in India, specifically in Bangalore. The new construction will be used to manufacture elevators - an area of strong growth in India. In fact, it has the second-largest elevator and escalator market in the world - behind China - with a total demand of 47,000 units per year.
The company expects to grow to a point where it will be achieving sales of 5,000 units per year in India by 2020. Mitsubishi Electric Corporation is investing heavily in its new elevator plant - which is scheduled to begin operations in July 2016 - and is adding a 41m elevator test tower as well as a field training centre to the facility.
Image credit: iStock/Auris
Promising future for the industry
The construction materials industry in India is continuing to grow, becoming more and more lucrative for international companies looking to get involved with this strong market. The recent boost in construction is causing a number of sectors to improve, as epitomised by recent news about the growth of the cement industry.
This sector has been growing for a while, but analysts were mildly worried when it slowed slightly in the first quarter of 2015. However, Sabyasachi Majumdar - senior vice-president of rating agency Icra - said this was merely "a seasonal phenomenon" caused by the monsoons. Icra now predicts the industry's growth will accelerate.
This financial year will see cement production increase by as much as 7.5 per cent, according to the ratings firm's predictions, thanks to increased demand from the construction industry. The Centre for Monitoring Indian Economy predicts this will rise to around nine per cent in 2016, then dip slightly to eight per cent the following year.