Even a dead cat bounces, but the UK Construction Sector has very few feline attributes: according to Duncan Brook, Director of the Chartered Institute of Procurement and Supply, it is currently “dropping like a stone” and last month saw its worst performance for more than a decade. Most contractors are predictably blaming it on Brexit but whatever the reason, new builds in the UK have now fallen to their lowest level for three years, orders are chronically delayed and as Mr Brook puts it with a sense of consummate understatement, large orders are suffering from “a lack of clarity that has amplified poor performance…Something is needed to pull the construction sector out of the quicksand”.
At least we know where to look for the cat…its probably in the quicksand.
But things couldn’t be more different in India: over the last three years the Cement Index has delivered positive returns of 22% and the Construction Index has grown by 48.9%: with both likely to be boosted by the eye watering infrastructure investment plans announced in last month’s Union Budget where the Government committed itself to building eight million new homes over the next five years (more than half of which are already under construction) and has two Million more planned for the subcontinent’s rural areas over the same period.
Seeming to signal the importance he attaches (rightly) to stewardhip of India’s explosive growth over recent years, Prime Minister Modi has taken charge of the Cabinet Committee on Economic Affairs which last week green lighted an initial investment of £1.8 Billion in the Dibang Dam Project: the largest ever hydro electric initiative on the subcontinent, expected to generate 2880 MW by way of much needed energy resources. Compare that with Hinkley Point in the United Kingdom where financing has still to be completed nearly ten years after the project was announced with short term construction costs being paid by EDF (at double the cost the UK Government would have paid had it borrowed the money at market rates).
And this surge tide of activity driving India’s economy is inevitably making its presence felt too in the subcontinent’s capital markets: Annai Infra Developers has just received clearance from SEBI for an IPO with a market cap of £26 Million and it’s companies like Annai that are quite literally building on the demographic trends at play on the subcontinent at the moment, where what will soon be the most populous country in the world is becoming increasingly urbanised, increasingly wealthy and increasingly hungry for property.
Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, working to meet the challenge of the subcontinent’s urban housing shortages in a practical and focussed manner. It was established to harness the potential of India’s dynamic and fast evolving markets and to deliver opportunities for investors: because, when it comes to investing on the subcontinent, nobody knows the subcontinent’s markets like Red Ribbon.
It’s impossible to underestimate the sheer scale of the challenge currently facing India’s real estate markets, so I’m not surprised the reinvigorated Modi Administration has put infrastructure and construction at the heart of the recent Union Budget.
Slowly but surely the subcontinent is building its way to the head of the economic top table, and it’s measures like these that will get it there all the faster.