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How to benefit from India’s construction boom

How to benefit from India’s construction boom

By Archive, India, News No Comments

India’s construction needs are no secret, nor are the forecasts for impressive growth across the country’s construction industry. When investing in India it makes sense to capitalise on growth markets within the country. Right now, there options for businesses and investors both, to become a part of a construction industry that’s set to be the third largest in the world, just a few years from now.

With India’s general election on the way, Prime Minister Narendra Modi and his government are working hard to re-iterate their promise on housing and infrastructure development across the country. Even if the ambitious targets aren’t quite met, achieving a high percentage of them still requires a significant amount of investment and construction. That’s something that appeals to many investors and companies who wish to grab their part of the potential activity, business and return on investment that’s available.

Looking at the potential for India’s construction sector, according to KPMG, India’s construction sector will be third largest in the world by 2025, behind only China and the US, with a valuation over $1 trillion.

Meanwhile, international construction consultancy Mace Group, estimates that by 2050, India’s urban population will be around 814 million, almost double the 449 million people living in urbanised areas today.

Doing business in India

These forecasts all stem from India’s huge construction, urbanisation, smart city and industrial corridor plans. With so much construction required to achieve even part of those targets, India has also made changes to make it easier for foreign-owned businesses to work and operate in the country.

According to World Bank rankings, India has climbed up its ease of doing business rankings, to 77th, from 100th and 133rd, prior to that. Of course, improvements could still be made, but its certainly moving in the right direction.

Improvements include:

  • Tougher and more standardised regulatory oversight.
  • New foreign direct investment rules that overseas investors can own 100% of an Indian-based business.
  • A clearer tax code.

But, its not all plain sailing, particularly for businesses with no links to, or knowledge of the way business works in India. That remains the case for the construction sector, despite the huge building needs across the sub-continent.

With the potential for growth and profits as high as the country’s needs for every kind of construction specialist, many small Indian businesses, including startups, are working towards securing their own piece of the investment returns that are available.

That means winning those contracts and operating in a way that will secure a future across India, won’t be easy – if you go it alone.

Collaboration and investment

One way for foreign-owned businesses and investors to become part of the construction boom and benefit from the huge government and private investment across the country, is through collaboration with existing Indian-based companies.

Of course, forming a relationship and building enough trust to encourage both parties to make a significant investment and work together, doesn’t come easy. But the end rewards will certainly make the effort of doing this correctly, worthwhile.

If that doesn’t appeal, there is another option: to invest in an existing construction-sector related business. One that has all the connections and capabilities in place to expand in response to the ongoing needs of India’s planned construction and infrastructure projects.

One that not only has a management team experienced in doing business in India and the UK, but has also been created with sustainability at its core.

Modulex is one such prospect. Construction of the first Modulex factory is already underway and set for completion in December 2019.

Providing a modular construction facility in Indapure, Pune District, 250 Kms from Mumbai, Modulex will have an annual capacity to create 200,000 square metres of steel commercial and residential buildings, off-site. And that’s just the beginning.

Demand for modular construction in India is growing and Modulex will become an intrinsic part of fulfilling the demand for every type of building, to support India’s ongoing urbanisation. Why? Because modular construction provides a cost and time-effective answer to India’s huge construction needs.

Modulex can help India achieve its goal of housing for all and the creation of modernising existing cities, while also building new ones. What’s more, it can do so in a sustainable way that doesn’t diminish the natural capital of the country.

Red Ribbon CEO, Suchit Punnose said:

India’s construction goals are no secret and the forecasts for growth across the industry in the next 5 – 15 years are of real interest to investors and business around the world. Doing business in India is easier than its ever been, but for the uninitiated, challenges remain.

Investing in Modulex is something that brings many benefits beyond the potential for a strong return on investment. Modulex is managed by experienced asset managers, with expert knowledge of India and the UK investment and business markets.

Its sustainable and scalable and has been developed to remain a feature of India’s construction industry now, at its hour of need and also well beyond.

Government continues to support technological innovation in construction

Government continues to support technological innovation in construction

By Archive, India, News No Comments

The Government continues to strive to achieve its target to house every inhabitant of India by 2022. A new initiative to encourage technological innovation in the construction sector was launched earlier this year and modular construction could benefit from this new push to solve India’s domestic construction needs and also, lift the country’s reputation in the industry.

Ever since Narendra Modi’s Government announced plans to house every inhabitant of India and build millions of new, affordable homes across the country by 2022, there has been a real push to approve and build those properties. As in most countries around the world where more housing is required, a combination of construction techniques are being employed to create an adequate amount of housing.

In recognition of the sheer size of the challenge, some Governments, including India’s, are increasingly supportive of new technologies that can impact on the delivery of those homes:

  • Faster.
  • In a cost-effective manner.
  • With eco-friendly techniques.
  • In a way that can also provide a long-term boost to the economy.

India’s latest push to encourage more technology and efficiency in construction, is the Global Housing Technology Challenge. The idea is to instil new and innovative ideas that can be used to propel India’s construction industry forward, both in the short-term to help achieve its domestic construction targets and in the long-term as an industry on a global scale.

How technology can improve construction methods

Technology is something that now plays a part in most industries, that for many years relied on traditional methods, systems and processes. However, the construction industry is one that has lagged behind in the development and encouragement of change and innovations.

However, there remains a real and still growing need for homes across many countries, not just India. New innovations are urgently required from builders and construction companies. Without that, they will struggle to deliver cost-effective, quickly built but still safe and longstanding, residential and commercial buildings.

Among the construction technology, or ConTech, techniques that could support India’s construction needs are:

  • Drones – which can be used to improve precision and accuracy on building sites.
  • Construction software platforms – supporting real-time collaboration on construction developments of all types and sizes.
  • Robotics – something that can be utilised both in traditional and modular construction sites and factories.
  • Modular construction – where materials and time can be used more effectively, lowering costs and construction time and creating more energy efficient projects.

This represents just a handful of the types of technology and innovation that could become widespread across India’s construction industry, in a matter of just a few years. What’s more, the prefabricated construction industry has already been slowly gaining support in India for some time, making now the perfect time to develop it more vigorously.

Modular construction in India

The modular construction industry is already growing across India and being utilised in different ways. Of course, where housing construction increases, so do thoughts towards luxury homes and higher profit margins.

While there’s no doubt that prefabricated homes can produce unique and beautiful homes – for a price – the industry is also perfectly placed to provide the low-cost, quickly built properties that India so desperately needs.

By encouraging fresh technological innovations to support India’s construction needs, its likely PM Modi is attempting to ensure that the momentum in the low-cost homes market isn’t lost. The timing is poignant, given the March 2019 construction targets don’t appear to have been met. Indeed, it could be considered an inventive ploy to help drive India’s construction industry to become one that gains global recognition.

That’s something that could have a lasting, positive effect on the country’s economy, while also delivering the required homes and buildings across India, right now.

Suchit Punnose, CEO of Red Ribbon said:

The modular construction industry is one that answers many of the requirements of India’s housing needs, including the desire for sustainability and economic benefit, not to mention speed and cost-effectiveness. That why we identified Modulex as the right investment opportunity for us and our clients.

Modulex is India’s first steel modular building factory, which delivers on all three pillars of sustainability – Planet, People and Profit. Modulex is perfectly poised to help answer India’s construction needs and is already an innovative solution within the industry.

Red Ribbon is proud to support the growth of innovative, modular construction across India. Not only because it can be a part of a broader construction solution, it can help deliver a reputation for innovative industry developments and a sustainable economic growth.

The importance of India as a Growth Market

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Growth Markets, those economies with GDP that account for more than 1% of global economic output, have rightly been described as “economic powerhouses”; they simply can’t be ignored, which is why the investment team at Red Ribbon Asset Management have a core principle that no portfolio can be considered properly balanced which doesn’t have at least 10% of its assets deployed in Growth Market Projects; and once deployed Red Ribbon’s Mainstream Impact Investment Strategies have a very real potential to act as a turbo charger for investor returns.

 

And India is the fastest growing large economy in the world so inevitably it has drawn attention over recent years as the most interesting of the Growth Markets, something of a bellwether for global economic change. That’s another reason why investment on the subcontinent is at the heart of Red Ribbon’s strategies, and it’s certainly not alone in thinking so.

 

Take Instagram for example.

 

Mike Krieger, co-founder and chief technology officer at Instagram, found himself with more than the odd dollar or two to spend when Instagram was bought by Facebook in 2012 for a cool $1 Billion. The company has more than 700 Million users worldwide of which roughly 5% (or 30 million) are located on the subcontinent. And that demographic is likely to become more significant still as India’s population is projected (by the United Nations) to be the biggest on the planet by 2020; added to which the subcontinent is also becoming more affluent, better able to buy into the hardware and infrastructure of the social network (as evidenced, of course, by this year’s Vodaphone acquisition).

 

None of that has been lost on Mike Krieger:

 

India is a super interesting market for us. We think of India as one of our high growth markets. In 2012, when we decided to expand Instagram, our user base was about 50% from the US and the remaining from other geographies. Today, about 70% of our users are from outside the US and that will only be growing. Hence, we are looking at high-growth markets including India.”

 

It’s a good illustration of why India is rapidly becoming more important on the world economic stage: with a burgeoning population, faster growing ever more wealthy and creating an increasingly resilient domestic demand for everything from mobile phones to electric cars. It is a mix of socio economic factors that also illustrates an interesting investment dynamic all of its own.

 

Mainstream Impact Investment, the innovative investment strategy at the heart of Red Ribbon’s policies, is driven by precisely this kind of resilient, long-term economic dynamic; because growth of the kind being experienced in India at the moment is both central to and ultimately dependent on the wider society (linked intimately with factors such as population growth and average income) and that, in turn, is linked inevitably to a healthy environment. They are all interdependent. That’s why Red Ribbon is committed to pursuing Impact Investment Strategies in Growth Markets.

 

Read about Red Ribbon Asset Management here: https://redribbon.co/

Read about Instagram and India here; timesofindia.indiatimes.com/topic/Instagram

Read about Red Ribbon Fund Management here: https://redribbon.co/

Read about Mainstream Impact Investment here: reports.weforum.org/impact-investment/

Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.

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