The Indian construction sector, which over the last few years had faced challenges arising from weak investment cycle and delays/uncertainties in policies leading to weak order inflows as well as slowdown in execution, is expected to get a much needed push with a stable Government at Centre having infrastructure development as one of its core agenda, according to ICRA Research.
ICRA expects revenue and profitability pressures to continue in near term post which the construction activity will be dependent on improvement in investment cycle and GDP growth which would also be dependent on Government's consistent and determined approach towards economic reforms.
''Over the medium to long term, construction spending is expected to witness robust growth driven by the need for public infrastructure to support the growing economy, and increasing urbanization which will drive the housing demand. Construction companies are also expected to witness significant opportunities in the railways, ports, urban infrastructure, airports and roads sectors. In railways segment, the Dedicated Freight Corridor (DFC) project is expected to provide significant opportunities to construction companies as the first phase of the project which involves corridor of 3,300 km with estimated cost of Rs. 1 trillion has been started,'' said ICRA.
''In the ports sector, multiple projects on PPP basis are under proposal. In urban infrastructure, construction of metros continues to present opportunities for construction companies with projects under execution in eight Indian cities and at various stages of approvals in at least another six cities. In the airport segment, proposal for development of low-cost airports in tier-2 and tier-3 cities will present sizeable business opportunity. Similarly, in the roads sector, Government's focus towards upgrading national and state highways is expected to add to the order inflows for players in this sector. With the PPP route for awarding road projects facing weak response, National Highways Authority of India (NHAI) is likely to offer projects primarily on EPC mode in the medium term which would add to the construction sector order book,'' it added.
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