India Construction Market Outlook to 2028

India Construction Market Overview

The Indian construction market was valued at USD 890 Bn in 2023, growth is primarily attributed to government initiatives such as Smart Cities Mission, Pradhan Mantri Awas Yojana (PMAY), and significant investments in infrastructure projects including roads, railways, and urban development. inflows in construction (infrastructure) activities inflows $33.91 Bn is one of the leading recipients of FDI in the country.

The market is fragmented by several key players in the market include Larsen & Toubro, Tata Projects, Shapoorji Pallonji, GMR Group, Hindustan Construction Company, Sobha Ltd., DLF Ltd., and Oberoi Realty.

In 2023, Larsen & Toubro (L&T) announced the acquisition of a significant infrastructure project worth USD 1.2 billion from the National Highways Authority of India (NHAI). This project involves the construction of a new expressway connecting major economic hubs, expected to enhance connectivity and boost economic growth.

India Construction Market Analysis

The Indian government’s focus on infrastructure development is a major growth driver for the construction market. Initiatives such as the Bharatmala Pariyojana and the Pradhan Mantri Gram Sadak Yojana aim to improve road connectivity across the country.

The Indian construction sector has attracted substantial foreign direct investment (FDI) due to favorable government policies and the country's large infrastructure needs. The government’s policy of allowing 100% FDI in construction development projects, including townships, housing and real estate broking services.

The construction market is a major contributor to India’s GDP, accounting for around 8% of the total GDP in 2024. The sector's growth stimulates economic activity by creating jobs, boosting demand for materials and services, and facilitating infrastructure development.

The western region of India, particularly Maharashtra and Gujarat, dominates the construction market. Cities like Mumbai, Pune, and Ahmedabad are major economic hubs with high demand for commercial and residential construction. Maharashtra alone contributes significantly to the country’s GDP, driving construction activities.

India Construction Market Segmentation

By Type: The India Construction Market is segmented by type into residential, commercial and infrastructure. Residential type was the dominant type as there is High demand due to population growth, urbanization, and government housing schemes like Pradhan Mantri Awas Yojana. Government initiatives and public-private partnerships (PPPs) play a crucial role in the growth of this segment.

By Material: India Construction Market is segmented by cement & concrete, steel, wood and others. Cement and concrete were the dominant segments by material as essential for all types of construction projects, offering durability and versatility. The cement industry’s growth is closely tied to the overall construction market, with major companies expanding production capacities to meet rising demand.

By End-User: India Construction Market is segmented by end user into government, private sector and industrial. The government subsegment were the dominant segment in India Construction Market due to major investments in infrastructure and public works projects.

India Construction Market Competitive Landscape

Company

Establishment Year

Headquarters

Larsen & Toubro (L&T)

1938

Mumbai

Tata Projects

1979

Mumbai

Shapoorji Pallonji Group

1865

Mumbai

Hindustan Construction Company

1926

Mumbai

DLF Limited

1946

New Delhi

Larsen & Toubro completed over 500 projects in 2023 alone. Financial performance is also crucial; DLF Ltd. reported revenues of INR 6,012 crore in the 2023, underscoring its market position.

Hindustan Construction Company’s adoption of AI has reduced project delays by 20%, significantly improving operational efficiency and project outcomes.

Shapoorji Pallonji’s portfolio includes residential skyscrapers, commercial complexes, and large-scale infrastructure like Mumbai Metro, showcasing its versatility and capability to handle varied project types.

Tata Projects, with a net profit of INR 450 crore, demonstrates robust financial stability, enabling it to secure and execute mega infrastructure projects across the country.

India Construction Industry Analysis

India Construction Market Growth Drivers

Affordable Housing Schemes: The government’s focus on affordable housing, through schemes like Pradhan Mantri Awas Yojana (PMAY), significantly drives the construction market. PMAY aims to provide affordable housing to all urban and rural poor by 2022. As of 2024, the scheme received an allocation of USD 30 billion, targeting the construction of over 20 million affordable homes.

Foreign Direct Investment (FDI) Inflows: The construction sector in India has attracted substantial foreign direct investment (FDI) due to favourable government policies. By 2024, FDI inflows into the construction sector surpassed USD 25 billion, enhancing capital availability.

Renewable Energy Projects: The expansion of renewable energy projects, particularly solar and wind energy installations, is a significant growth driver for the construction market. The Ministry of New and Renewable Energy (MNRE) aims to achieve 175 GW of renewable energy capacity by end of 2024, with substantial investments in solar parks and wind farms.

India Construction Market Challenges

Regulatory and Approval Delays: The construction market in India faces significant challenges due to regulatory and approval delays. Obtaining necessary permits and clearances from multiple government agencies can be time-consuming and cumbersome.

Labor Shortages and Skill Gap: The construction sector often experiences labour shortages and skill gaps, affecting productivity and project quality. In 2024, the demand for skilled labour, including engineers, architects, and construction workers, continues to outstrip supply.

Financing and Investment Risks: Securing financing for large-scale construction projects can be challenging due to the high capital requirements and associated risks. Innovative financing models, such as public-private partnerships (PPPs) and infrastructure investment trusts (Inv ITs).

India Construction Market Government Initiatives

Smart Cities Mission (2015): The Smart Cities Mission, launched in 2015, aims to develop 100 smart cities with modern infrastructure, efficient urban mobility, and sustainable environments. By 2024, the government has allocated USD 30 billion to this mission, driving substantial investment.

Pradhan Mantri Awas Yojana (PMAY) (2015): Pradhan Mantri Awas Yojana (PMAY) aims to provide affordable housing for all by 2022. The scheme targets the construction of 20 million affordable homes for the urban poor, with financial assistance and subsidies for beneficiaries.

Bharatmala Pariyojana (2017): Bharatmala Pariyojana, launched in 2017, aims to develop a robust road network across India, enhancing connectivity and economic growth. The project focuses on constructing highways, expressways, and rural roads to improve transportation infrastructure.

National Infrastructure Pipeline (NIP) (2019): The National Infrastructure Pipeline (NIP), launched in 2019, aims to develop infrastructure projects worth USD 1.5 trillion by 2025. The initiative focuses on various sectors, including transportation, energy, water, and urban infrastructure.

India Construction Market Future Outlook

The market is expected to show a significant growth, driven by continuous government investments and urbanization trends, ensuring sustained growth and development.

Future Market Trends

Adoption of Advanced Construction Technologies: The adoption of advanced construction technologies, such as Building Information Modeling (BIM), prefabrication, and 3D printing, is expected to enhance efficiency and reduce project timelines.

Growth of Public-Private Partnerships (PPPs): Public-Private Partnerships (PPPs) are becoming a preferred model for infrastructure development in India. Until 2024, the government has increasingly relied on PPPs to finance and execute large-scale infrastructure projects, such as highways, airports, and urban development. PPPs leverage the expertise and resources of the private sector while mitigating financial risks for the government.
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