The construction sector in India has long been plagued by issues stemming from its highly unorganised nature. This has led to inefficiencies, lack of transparency, and accountability issues, which in turn affect the growth potential of the industry. The introduction of policies like the Real Estate (Regulation and Development) Act, 2016 (RERA) has marked significant progress in bringing some level of regulation and order to the sector. However, much more needs to be done to fully leverage the potential of India's booming real estate market, particularly in housing needs across tier 2 towns and metropolitan areas.
Market Growth and Potential
The Indian construction industry is one of the largest in the world, and given the government push on infrastructure development, is set to grow exponentially in the coming years. According to a 2024 report by Knight Frank and CII, the Indian Real Estate sector is currently estimated at USD 482 Billion, and contributes 7.3% to the total economic output. By 2034, the sector is expected to expand to USD 1.5 Trillion, contributing 10.5% to the total economic output. This growth is driven by the rising demand for housing, particularly in tier 2 and tier 3 cities, where urbanization is occurring at a rapid pace. The government's ambitious "Housing for All" initiative aims to build 20 million affordable homes by 2022, further boosting the sector.
However, despite its size and importance, the sector remains largely fragmented and unorganised. This fragmentation leads to several issues, including delayed project completions, cost overruns, and poor quality of construction. According to a report by KPMG, nearly 45% of construction projects in India face delays and around 83% experience cost overruns. These inefficiencies not only hurt Construction partners but also affect homebuyers and the economy at large.
The rapid population growth in metropolitan areas and emerging tier 2 towns, combined with the expansion of new offices and businesses across the country, underscores the importance of urban infrastructure planning. Timely completion of approved projects is essential to accommodate this growth and ensure sustainable development.
Organising the construction sector can help in effectively meeting this demand and bring about several benefits, including improved project timelines, cost savings, and enhanced quality of work. By leveraging technology like IOT and Automation, and adhering to standardized practices, construction partners can efficiently and optimally utilize land parcels, reduce wastage, and deliver projects on time. This will not only fulfill the housing needs of the growing population but also contribute to the sustainable development of urban areas. Some of the applications of emerging tech in real estate development can be understood as follows:
- Real-time Monitoring and Reporting: Leveraging IoT devices, real estate developers can continuously monitor construction site activities and provide real-time data on progress, equipment usage, and worker productivity, ensuring that all stakeholders have access to accurate and up-to-date information.
- Enhanced Project Management: Automation tools can help streamline project management processes, including scheduling, budgeting, and resource allocation, providing clear and transparent insights into project timelines and financials.
- Improved Safety Compliance: IoT sensors can track safety parameters and detect potential hazards, ensuring that safety protocols are strictly followed and any violations are immediately reported and addressed, enhancing overall site safety transparency.
- Supply Chain Transparency: Automation in supply chain management can track the movement and usage of materials, ensuring that all materials are accounted for and reducing the risk of theft or mismanagement, thereby increasing transparency in procurement and inventory management.
- Data-Driven Decision Making: The integration of IoT devices with data analytics platforms can provide actionable insights derived from real-time data, enabling informed decision-making and improving transparency in the planning and execution phases of construction projects.
- Transparent Payments and ESCROW Model: Technology automation can facilitate transparent payment processes where stakeholders receive real-time updates on construction progress and can make installment payments accordingly. Implementing an ESCROW model ensures that funds are securely held and only released upon verified completion of project milestones, fostering trust and accountability among all parties involved.
While the above pointers will help drive efficiency and transparency, policy support will help build standardised process driven ecosystems. The implementation of RERA mandated registration and regulation of projects has brought about accountability and been transformative for India's real estate sector. However, effective implementation and enforcement remain challenging in many states.
In conclusion, organizing the unorganised construction sector in India is imperative for achieving transparency, accountability, and efficiency. Complementary policies addressing land acquisition, labour management, and environmental clearances are still needed to further regulate and improve the sector. Embracing technology and further regulatory measures are essential for unlocking the full potential of the industry.
In the recent Union Budget 2024, the government announced an allocation of Rs 10 lakh crores for addressing the housing needs of 1 crore poor and middle-class families, under the PM Awas Yojana-Urban 2.0. This reinforces the government's commitment to affordable housing. This focus, along with infrastructure development policies, supports the growth of the construction sector. With the right approach, India can not only meet its housing needs but also pave the way for sustainable and inclusive growth in the construction sector.
