Construction Information

Many people consider “construction company” and a “real estate
construction company” as same. In reality these are two different
entities. Real Estate is a land or a finished product in the form of a
building or house. Construction is a general term and it includes
everything from infrastructural projects like bridge, roads, railways or
hospitals. Both the industries are facing challenges in the current
dipping economy. Let’s take a look at the challenges which they face.

Many rating companies have maintained a negative outlook in the
construction industry thus raising concerns for the them. This was
because of the liquidity crunch resulted because of the current steps
taken by the central bank. The focus of the companies is in the
completion of the current projects rather than investing on the new
ones. Thus there is no stimulus to the industry as only execution of the
in hand projects is concentrated upon rather than acquiring new
projects. There is a pressure on the working capital of the companies as
well along with the delay in obtaining the required statutory clearance
thus putting strains on the bottom line of these company.

So
how can the construction companies counter this challenge? Innovation is
key. Innovation along with effective collaboration can help the
companies combat the downturn. The on-time completion of the projects in
the required tenure, budget and standards will help the company enhance
their brand reputation along with reducing the losses because of the
penalties.

The scenario is similar when we talk of the real estate companies. The
real estate industry has an impact of the economic performance of a
nation. The first half of 2013 saw overall sales of residential real
estate properties going down. The prices of the final product are rising
because of the higher input cost and the real estate companies have no
choice but to pass the price to the final consumer. It’s difficult to
acquire land for building the property and fetch licenses for the same.
Also, home loans are more expensive because of the increase in the
lending rates as a result of which the properties are out of rich of
majority of the consumers.

The real estate construction
companies need to take effective measures in order to revive the
industry. There should be a constant demand supply check and focus
should be on the basic needs of majority of the consumers. Investments
in the properties must be encouraged. NRIs can play a crucial role in
this. The real estate companies can focus of commercial properties where
the demand is more as compared to residential ones. The government and
the bureaucrats must take some proactive measures in reviving this
sector.

India
today is growing at a rapid pace. The demand for infrastructure is
tremendous. With the population being one of the largest in the world,
the need for roads, highways and other infrastructure facilities is big.
New cities and rural towns are dramatically changing into an urban
landscape. This transformation is fuelling growth and providing a launch
pad of an opportunity for a construction company.In the last fifteen
years the flow of funding due to globalization has also made available
the funds required for kick starting these activities. With foreign
direct investment gradually increasing, the investors have been able to
spot the domestic demand that exists and therefore have been constantly
diverting funds to India.

Today
the government works on a variety of models to outsource its
construction activities. A popular model is the build operate transfer
model. Wherein the construction company takes on the expenses of
developing a project, then charges toll from the end users for a set
period and then hands over the project back to the government. This
model is easy on the governments’ pockets and is also profitable for the
construction company. Moreover the projects under this model are
completed much faster as revenues only start once wok has been
completed. As the construction company has a vested interest and has to
earn revenue from the consumers they maintain quality and a speedy flow
of work on site. One of the drawbacks is that most companies have to
take loans and borrowing from banks and other institutions. The recent
rise in interest rates has made borrowing quite expensive. The interest
on these loans cuts a substantial dent in the company’s pocket and they
have to plan carefully on the project feasibility before taking on a
B.O.T model.

Even though challenges exist, the sheer volume of
available work makes the construction industry a lucrative one. Public
infrastructure being the main driving force there are secondary driving
forces such as housing. The flow of foreign direct investment and
globalization has given a rise to job opportunities throughout the
country. With many multi nationals setting up shop here and major
corporations outsourcing their IT work to India, the demand for housing
this workforce is great. This has led to a rapid growthin the housing
sectors. With developers moving fast to pick up prime land, the race for
developing quality homes is exciting.

This
further increases demand for quality construction company where their
services are required for developing group housings, townships, villas
etc. With large projects on the offer they offer a good volume to the
building company. Most of the private projects operate on a slab system
of payment. Certain payment slabs are pre decided. Then as a particular
slab is reached, a running bill is submitted and subsequently upon
checking a payment is released. This is a good and effective way for
making payments as it promotes transparency and quality, as work is
checked on periodic stages for quality. Moreover it also ensures speedy
progress. In most cases there may also be a project management company,
which check the work on the developers behalf and then signs off the
bills.

Overall the construction industry in India is a success
story, with cost effective labor and big demand the industry is posed to
keep growing for many years to come.