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Global v/s The Indian Construction Market In 2021

2021 is a year of re-emergence and development in the construction industry after a tumultuous year of modifying projections and shifting expectations. Stronger regulations lead to a decreased margin for error and waste while increasing construction costs and labour shortages continue, challenging the industry to innovate competitive new ideas.

The COVID-19 pandemic changed how the construction sector is doing business this year, from organizing projects to recruiting staff to meet with customers. Looking ahead, the effects of the pandemic will impact many business trends. Let's look at the rate at which the construction market is expected to grow globally and in India while examining the opportunity trends.

Global construction market

At a compound annual growth rate (CAGR) of 9 per cent, the global construction market is projected to rise from $11491.42 billion in 2020 to $12526.4 billion by the end of 2021. The rise is primarily due to the reorganization of industries and the rebound from the effects of COVID-19, which had previously resulted in restrictive preventive measures, including social distancing, remote working, and commercial operations closure, resulting in operational difficulties. At a CAGR of 7 per cent, the market is forecast to hit $ 16614.18 billion in 2025.

The construction industry includes the sale by companies (organizations, sole dealers, and partnerships) of construction services and related products, such as cement and gypsum used for plastering and construction of buildings or engineering projects (e.g., highways and utility systems). The construction industry includes new work, upgrades, improvements, maintenance, and repairs. The construction sector is divided into building construction, construction of heavy and civil engineering, specialist trading contractors, and planning and developing the property.

Construction companies widely use green construction techniques to construct energy-efficient buildings and lessen construction costs. Green construction entails constructing energy-efficient buildings with minimal environmental effects using renewable construction materials such as gypsum rather than cement to plaster the building walls and other construction techniques.

Around 51 per cent of construction companies in the UK were actively engaged in green construction projects, per the World Green Building Trends Survey 2015. Eco-friendly construction materials such as natural paints, steel beams made of recycled material, and gypsum plaster are widely used in the UK. Construction costs have steadily risen in this period due to increasing material costs. With the increasing cost of materials such as crude oil, companies in the industry witnessed subdued growth in their earnings as a critical feature of asphalt increased by 49 per cent along with the compound annual growth rate (CAGR) of 6 per cent the global demand for gypsum materials is anticipated to rise from $55.19 billion in 2020 to $58.48 billion in 2021, softwood lumber, a key element used for building construction, which grew by 23 per cent.

During the period, the rise in the construction market was largely caused by the growth in construction activity in emerging markets, namely, China, Brazil, India, Saudi Arabia, and Indonesia. They were the emerging markets that reported substantial construction activities.

Indian construction market

With a projected capital expenditure of US$ 75.8 billion, an improvement of 34.5 percent from last year's budget, India's Union Budget 2021-22 has boosted the country's beleaguered construction industry. The construction industry is projected to recover by 14.5 per cent by the end of 2021, with the government concentrating on infrastructure to accelerate economic growth.

In addition to the proposed federal capital expenditure, the government has also undertaken to provide the states and autonomous bodies with US$27.4 billion in capital expenditure in their respective fields. Reflecting how committed the government is to giving the economy a boost to revive from the recession of COVID-19, capital spending would be 15.9 percent of the total budget at a 10-year high.

Other budget parts will benefit the construction industry and create the National Bank for Financing Infrastructure and Development, a new development financing institution. This will serve as an infrastructure funding provider, enabler, and catalyst with an overall capital base of US$2.7bn and a projected lending target of US$68.4bn over three years. Another essential move is the introduction of a national 'Asset Monetization Pipeline', which will monetize the resources and increase funding for the infrastructural section via the sale of toll roads, oil and gas pipelines, and power transmitting sections.

As an outcome of the intended capital expenses, the construction industry is expected to benefit the economy to emerge from the COVID-19-induced decline, lead India to a new growth path, and promote the government's objective of transforming India into a US $5 trillion economy.

Key global construction market trends in 2021

Through the novel COVID-19 introduced to several contractors' material shortages, 2020 brought its fair share of problems. Here are the key trends in the construction industry for 2021.

The emergence of smart cities
The Journal of Urban Technology defines smart cities as "high-tech-intensive" urban developments that link people, data, and urban elements to enhance a city:

  • Environmental-friendliness
  • The economy
  • Quality of living

As smart cities become more standard, the nature of construction projects will, in turn, be more complex. From pedestrian detectors to WiFi-enabled lighting, smart cities will require construction companies to improve their technical expertise. So in 2021, you will have to:

  • Evaluate the skills and equipment needed for smart urban growth
  • Plan for this change in how to develop cities

How to manage this trend

Training is the key to preparing for the growth of smart cities. Early investment in skills training is a brilliant idea for those who want to own this niche and will pay off in the long run as smart cities become the trend in urban growth.

A rise in the bottom line pressure:
Given the increase in construction revenues in previous years, the industry's net profits remain slim.

Construction earnings before interest and tax (EBIT) account for 5.5 per cent of a company's revenue. When it comes to unplanned expenses, leave a little wiggle room. On average, earnings before interest and tax (EBIT) from the construction account for only 5.5 percent of revenue.

The cost of construction materials, such as gypsum, concrete, and brick, is set to rise to make things even worse.

Construction companies and contractors should look long and hard at aspects they can optimize to generate a stronger bottom line, with the price of goods increasing in 2021.

How to manage this trend

Whether it's price bargaining with providers or automation of sales workflows, to thrive, construction companies need to emphasize productivity and cost-saving opportunities.

To thrive, construction companies need to emphasize productivity and cost-saving opportunities, whether it's price bargaining with providers or automation of sales workflows. To make sure profitability, companies need to consider how the variable cost of materials will impact their:

  • Budgets
  • Estimates and quotes
  • Bids

Reduced workforce
A shortage of jobs is nothing new as far as main developments in the construction industry go. Although the demand for construction services has risen in recent years, the number of employees has not.

Construction work openings have risen by 50 per cent since 2014, while the number of new hires trails 14 per cent behind. The repercussions of this labour shortage pose major risks to businesses willing to take on new construction projects.

Customer satisfaction becomes a struggle without the workers required to meet deadlines and perform perfect final touches. Teams must have the labourers needed for smooth execution for businesses eager to get repeat clients.

How to manage this trend

With construction workers decreasing slowly, businesses need to do more with fewer workers. A surefire way to improve efficiency is to complement your team's efforts with more efficient construction equipment or automation solutions.

Key Indian construction market trends in 2021

By the end of 2021, the Indian construction industry is anticipated to expand by 11.6 per cent.

The ever-growing complexity of consumers, increasing focus on the overall cost of ownership rather than initial investment alone, revised safety and sustainability laws, standardization of building codes, and digitalization of marketing processes are only a few disruptions the industry encounters.

Here are five main trends that will characterize this year's construction industry.

A factory-based, modular approach to construction
Real estate developers are pressing for cost rationalization. In exchange, construction companies will concentrate on modular designs and prefabricated structures. Construction tends to be more like a factory assembly process than an artisan workshop.

End-users' advantages will be apparent; factory-like construction will indicate stronger management and control over deviations, resulting in better and more standardized construction output at a lower price. And the shift towards off-site, factory-style manufacturing and construction would be a profitable way for developers and contractors to cut costs, increase efficiency and shorten their project timelines, with commodity prices in motion and a labour market that continues to tighten.

Slide into new commercial projects
Uncertainty about the future will possibly continue to affect the commercial, non-housing sector in 2021. 2020 has already seen a significant decline in the introduction of new commercial projects, on consideration of a prevalent shift to work-from-home routines

This pattern will only continue across 2021, but residential projects' growth will likely be seen as a counterpoint. The explanations are obvious enough: investment in large and costly buildings for new offices or hotels, two of the biggest components of the market for commercial projects, is hard to make in a world where it is hard to foresee the future of the two sectors they serve.

Reduced spending by customers
Employment cuts and pay declines across the economic spectrum have occurred. The mystery that looms large would play on the minds of customers and investors. There is also some concern in commercial real estate about the effects of common "work from home" policies implemented during lockdowns by Indian companies. Companies have adopted long-term remote working policies in many well-publicized cases, often from the technology or services industries.

Increase in cost of materials
The pandemic has greatly affected domestic and foreign supply chains, and it will take time before everything returns to pre-COVID levels. Because of a lack of supply, the construction market must prepare itself for regular price rises for raw materials. Also, governments across states or central governments can implement an additional cessation of taxes to improve their finances, directly affecting the price of materials.

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