Market Trends in
The infrastructure sector of India has evolved from projects funded by the Government purely for new business models that involve partial or total ownership of the private sector.
There was little importance to the creation of infrastructure assets, with the Government, which is both a facilitator and provider of infrastructure.
The beginning of the last decade has seen an increase in investment in the infrastructure sector, accompanied by a transformation in the business models with the more active participation of the private sector in the form of a public-private partnership (PPP) projects, especially in the electricity sector and roads.
1. The acquisition of land and of acceptance of the environment
2. Lack of coordination between the various governmental agencies.
3. Improper configuration of the projects, in particular the distribution of risks and benefits between government and the private sector
4. Lack of a good mechanism for the settlement of disputes between private actors and agencies
5. The external debt of the developers of the infrastructure, due to delays in the implementation and irrationality.
We need to welcome large industrial zones, the development of smart cities and creation of logistics network. Employment opportunities are also expected in the area of urban infrastructure development, such as the great urban transport and water supply projects in urban centers, caused by rapid urbanization.
Measures to improve the future of infrastructure:
1. The delays and irregularities should be reduced –
The Government should create a unique mechanism of authorization for the various approvals. It is necessary to a good regulator to monitor the progress of the authorization and coordination with various governmental agencies. Efforts are also needed to ensure the implementation of the contracts at the same time bound and in a transparent manner, with the aim of attracting private investment and FDI. Agencies such as the Cabinet Committee on Investment (ITC) need to be more proactive to clear backlog of projects.
2. Structuring of appropriate projects –
Current mechanism for structuring a project as an EPC or dpi or 100% of the private property needs to be relooked to take account of the different risk profiles of projects. How to private actors have become medians for risk-return profile of the projects, the Government must be put into thinking about the right way to the execution of the project. There is a need to create a mechanism for the settlement of disputes for PPP projects. The right care, must also be placed in the conditions of the contract for the provision of sufficient guarantees for the players of external circumstances.
3. The development of financing mechanisms to meet the needs of the sector,
Infrastructure companies have difficulties in raising funds, such as the banks have limited exposure to this sector, while the foreign funds are not a means to invest in the sector. In this sense, the long-term debt instruments such as the international pension funds will reduce the cost of debt and, therefore, the viability of projects of infrastructure. The proposal for new investment vehicles such as investment trusts (the infrastructure for the securitization of assets) and infrastructure debt fund (in the study of institutions such as the IL&FS IIFCL, etc.) should be quick to give a boost to the sector.
4. Effective project management –
Private companies must evolve their processes to employ the best project management tools and techniques. The auction and the assessment process must be tempered with a greater emphasis on the estimates of revenue and the identification of project risks. Companies need to resolve the problems associated with the lack of skilled labor and improve their practices of supply and management of projects, to reduce the incidence of cost overruns during execution.
Expected Growth Trends:
The future of the global construction industry looks good with opportunities in residential,
non-residential, and their infrastructure. The global construction industry is expected to reach an estimated $10.5 trillion by 2023, and it is forecast to grow at a CAGR of 4.2% from 2018 to
2023. The major drivers for the growth of this market are increasing housing starts and rising
infrastructure due to increasing urbanization and growing population.
Emerging trends which have a direct impact on the dynamics of the construction industry
include increasing demand for green construction to reduce carbon foot print. Despite adverse economic conditions, the global construction industry witnessed growth
during the past five years and the market is forecast to reach US $3,304 billion in 2017 with a
CAGR of 7.5% over the next five years. The organizations of major global events are expected to provide impetus to the construction industry over the forecast period.
Within the global construction industry, the residential segment is expected to remain the
largest segment. Financing for residential construction projects has become available with
improvements in market fundamentals, like lower interest rates.
APAC is expected to remain the largest market during the forecast period mainly due to
increasing urbanization, higher expenditure on infrastructural development, and affordable