Indian construction activity expected to grow despite soaring material costs

New Delhi, February 3, 2022: The Royal Institution of Chartered Surveyors (RICS), Construction experts in India painted a positive picture for the industry over the next year with strong levels of activity expected despite mounting concerns around the cost of materials needed to deliver schemes and the financial options available to developers, this according to the latest RICS construction monitor for the final quarter of 2021.

In terms of workloads for Q4 2021, +29% of respondents said they continued to see increases in demand for construction work. Infrastructure works are seen to be behind the much of the increase in workloads, with a net balance of +39% of respondents citing a rise – much of which is relating to boosting local transport systems. Elsewhere residential housing developments continued to show solid momentum with a net balance of +27% of respondents reporting growth in this area.

Looking to the year ahead, new infrastructure works are viewed as likely to lead the sector (by a net balance of +56%), with private housing and non-residential works closely following with both anticipated as also deliver strong growth in output (+55% and +51% respectively).

Despite this positive outlook, more respondents reported a fall in both new business enquiries (down by a net balance of -10%) and profit margins (-33%), suggesting profits and enquiries are not expected to match the increased workloads.

Concerns reported by respondents focused on cost of materials (80%) and the lack of financing available to make schemes viable (+76%) as the biggest factors that are now holding back the construction sector in India. Material costs are expected to grow by 7.17% over the next year – the largest increase faced by developers when compared with other costs such as other construction costs (7.01%) or paying for labour (6.26%).

Tarrant Parsons, RICS Economist, commented:  “The Q4 results point to the Asia-Pacific construction market in aggregate regaining some momentum towards the end of the year, following a flatter picture being reported in Q3.

Going forward expectations point to a strengthening in workloads across much of the region, with the infrastructure sector in particular anticipated to deliver a solid upturn in output.

Notwithstanding this, challenges around material cost pressures and labour shortages remain prominent and will likely continue to weigh on activity through the coming year.”

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