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G. Madhan

THE construction industry has robust growth prospects if the Government continues to focus on developing the country's infrastructure at a faster pace than in the past. The following segments appear to hold good prospects for growth:

Roads and highways

According to NHAI, of the total 14,162 km of roads developed under National Highways Development Project and other NHAI projects, contracts for 6,910 km (about 50 per cent) of roads are yet to be awarded.

Hence, there should be no dearth of opportunities for the players in this segment for the next couple of years. Companies such as Hindustan Construction, Punj Lloyd, Madhucon Projects, Nagarjuna Construction that have a good track record in constructing highways are likely to benefit from these projects.

Development of ports

The Government's ambitious Rs 1,00,000-crore `Sagar Mala' project is also likely to propel growth in this segment. This will open up opportunities for companies such as Larsen & Toubro, Afcons Infrastructure, Hindustan Construction and Gammon India that have expertise in activities such as dredging, construction of harbours, jetties, docks, container terminals, breakwaters and other marine structures.

The move to levy a maritime development cess of 5 paise per kg of cargo handled at the domestic ports to augment budgetary resources for this project indicates that the project may benefit from a part-financing structure that is similar to the one used for the tow high-profile highway projects.

Modernisation of airports

The Government has mandated that the equity holding of the Airports Authority of India (AAI) and other government/public sector entities would together be 26 per cent, while the remaining 74 per cent equity was to be contributed by the private partner.

The Government has decided to appoint a global technical advisor to assist the Civil Aviation Ministry on the parameters of the design and construction of the two ultra-modern airports, which are estimated to cost about Rs 5,000 crore.

L&T, which has expertise in airport complexes, including terminal buildings, visitors' lounges, maintenance hangars and runways, aprons, taxiways, airfield lighting to international standards is a likely beneficiary.

National Rail Vikas Yojana

This project involves the strengthening of rail infrastructure along the Golden Quadrilateral and its diagonals, connectivity to the 12 major ports and construction of four mega bridges at an estimated cost of about Rs 15,000 crore.

The Rail Vikas Nigam — a special purpose vehicle — has been created to undertake the works. The first tranché of funding ($113.6 million) for the project has been obtained from ADB and is being used for the construction of three mega bridges; negotiations with the World Bank, seeking second tranché of funding ($100 million) are on.

Companies such as Hindustan Construction, which has executed projects such as the Metro Rail Project in Calcutta, Gammon India, which has executed projects such as Vashi-Mankhurd bridge, Simplex Concrete Piles, which has expertise in piling for bridges, L&T, which has expertise in transmission line and railway electrification, are likely to capitalise on opportunities in this space.

Other infrastructure projects

The thrust given by the Central and State governments on urban infrastructure projects such as flyovers, stadia, and water supply and sewerage lines is also likely to provide considerable impetus to this industry.

Players such as IVRCL Infrastructures, Hindustan Construction and Gammon India may continue to garner a sizeable share of this market.

Housing

This, at present, is one of the major demand drivers — 70 per cent of the cement produced is consumed by the sector, against 40 per cent a few years back. The low interest rate regime and the continuation of tax sops for housing loans have continued to act as demand drivers for this segment.

The disbursements of Housing Development Finance Corporation, a major housing finance company, has grown by 30 per cent in the half-year ending September 2003, which also indicates the strong growth registered by this segment. This trend is likely to continue and is expected to offer scope for all the players in the industry, as the gap between demand and supply for housing units is projected to be over 30 million units.

Growth prospects could get a leg-up if the regulatory issues, that are a bottleneck for FDI investment in the real estate segment, are sorted out.

For instance, regulations stipulate a minimum investment of $10 million coupled with a minimum size of 100 acres. If it were brought down to a more economical size, it would spur growth in this sector.

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