Amidst a thriving housing market and substantial government investment in infrastructure, India is currently experiencing a construction boom. Predictions from Hardeep Singh Puri, the Minister for Housing and Urban Affairs, indicate that by 2025, India will rank as the third-largest construction market globally, trailing only China and the US. The construction industry, one of India's fastest-growing sectors, contributes 9 percent to the country's GDP and stands as the second-largest employer, providing livelihoods for approximately 71 million people.
The Narendra Modi-led government views the construction industry as a cornerstone of economic growth, leading to its rapid expansion and serving as a significant indicator of overall economic progress. Despite temporary setbacks caused by the Covid pandemic, the sector has rebounded strongly and is poised for remarkable growth in the years ahead, with estimates projecting a market value of $1.4 trillion by 2025.
Several factors contribute to this growth, including rising incomes, a considerable housing shortage in major cities, population growth, and substantial government spending on infrastructure development. With the United Nations forecasting India's population to reach 1.64 billion by 2047, with over half residing in urban areas, the government's focus on infrastructure spending has ignited an unprecedented construction boom.
10 Key Points
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Key Points
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Details
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Construction Market Ranking by 2025
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India aims to be the third-largest construction market globally by 2025, following China and the US.
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Growth Estimates
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Estimated to reach $1.4 trillion by 2025, the industry grew by 13.3% in Q3 of 2022, marking its best performance in five quarters.
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Driving Factors
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Increasing incomes, housing shortages, population growth, and government infrastructure spending are key drivers of the construction boom.
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Budget Allocation
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The 2024-2025 budget allocated Rs 11.11 lakh crore ($134 billion) for infrastructure development, equivalent to 3.4% of GDP.
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Foreign Direct Investment
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FDI in construction ranks sixth globally, with over $32 billion invested since 2000; 100% FDI permitted in completed projects for various sectors.
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Real Estate Sector Growth
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Real estate sector estimated at $1 trillion by 2030 and projected to grow to $5.8 trillion by 2047, employing over 18% of the workforce and impacting over 250 ancillary industries.
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Cement Industry Expansion
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Cement production expected to rise by about 12% annually to meet demands for rural housing and government initiatives like PM Gatishakti; capacity increase planned by 80 million tonnes by 2025.
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Infrastructure Projects
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Megaprojects like GIFT City, Dholera SIR, Surat DREAM City signify infrastructure growth; ongoing projects like Delhi-Mumbai industrial corridor and Bengaluru-Mumbai economic corridor add momentum to the sector.
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Affordable Housing Initiatives
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PM Awas Yojana has facilitated building nearly 37 million rural households; government's focus on affordable housing propels construction activity.
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The construction industry in India encompasses two primary segments: real estate and urban development, covering various projects such as residential, commercial, and hospitality properties, as well as essential urban infrastructure like water supply, sanitation, and transportation. Government expenditure on central schemes has increased significantly, with infrastructure spending reaching record highs in recent years.
In the 2024-2025 budget, Finance Minister Nirmala Sitharaman allocated Rs 11.11 lakh crore ($134 billion) for infrastructure development, representing 3.4 percent of the GDP, demonstrating the government's commitment to fueling growth in this sector. Additionally, the construction industry has been a major recipient of foreign direct investment (FDI), further bolstering its expansion.
Moreover, the robust real estate and cement industries play pivotal roles in driving the construction sector forward. With the real estate sector projected to reach $1 trillion by 2030 and $5.8 trillion by 2047, and the cement industry poised for an annual production increase of approximately 12 percent, these industries are integral to India's economic growth trajectory.
The government's focus on infrastructure development, including initiatives like PM Awas Yojana for affordable housing, megaprojects such as GIFT City and the Delhi-Mumbai industrial corridor, along with heavy investments in renewable energy, further propel the construction sector's growth. As infrastructure projects continue to unfold across the country, infrastructure-related stocks and funds are witnessing strong performances, signaling sustained growth in the construction industry and its significant contribution to India's economic development.