India set to become third largest construction market globally

Image: Gayatri Malhotra/Unsplash

According to the International Tropical Timber Organization (ITTO), India is seeing a construction boom, and India’s Union Minister for Housing and Urban Affairs Hardeep Singh Puri has suggested that in 2025 the country is set to become the third-largest construction market globally, after China and the US.

The construction sector accounts for 9% of India’s GDP and is the second-largest employer in the country. It has been estimated that the industry could grow to US$1.4tn by 2025.

In the July-September 2023 quarter, construction expanded 13% year-on-year, marking its best performance in the last five quarters. The growth has been attributed to higher and rising incomes, a significant housing shortage in major cities, population growth and robust government expenditure on infrastructure development.

The construction industry in India comprises two main segments, real estate and urban development. Within the real estate segment there are residential, office, retail, hotel and leisure projects. The urban development segment encompasses sub-sectors, including water supply, sanitation, urban transport, schools and healthcare facilities.

In the 2024-2025 budget announcement, the Minister of Finance, Nirmala Sitharaman, announced an allocation of approximately $134bn for infrastructure development worth 3.4% of the GDP. This was up from around $133bn in 2023-24.

Infrastructure development is also one of the leading recipients of FDI occupying sixth place overall, and has attracted over $32bn since 2000.

The Real Estate sector boasts of connections with over 250 ancillary industries and provides employment for more than 18% of the workforce.

In related news, the government has reported that GDP expanded 8.4% in the October-December quarter thanks to brisk manufacturing and construction. The government also revised up its GDP growth forecast for the year ending in March 2024 to 7.6%, from its January projection of 7.3%.

The third-quarter GDP number was the highest in six quarters and was the result of 12% rise in manufacturing activity and a 10% expansion of the construction sector. The previous two quarters’ GDP growth rates were also revised up to 8.2% for April-June, from 7.8%, and to 8.1% for July-September, from 7.6%.

Source: ITTO