Funding for construction tech start-ups hits seven-year high

Investments in construction tech start-ups in India hit record-high levels in 2021. The segment received a total funding of $104.2 million (as of June 15, 2021), the highest in the last seven years, according to data from Tracxn.

Firms that have been founded since 2010 have been considered for this analysis.

Accelerated digitisation

“If one looks at the penetration of technology and digitisation historically and globally, construction is one of the least digitised industries. While there were early offshoots of digitisation in sales and head office operations in construction, Covid has accelerated digitisation across the value chain of construction. In large-scale construction, Covid has accelerated use cases around the need for remote monitoring, audit, progress, material ordering and tracking. In residential construction, the preference has changed to a low-touch and high-digital interaction across the design to handover process,” said Sandeep Mishra, Vice-President, Research and Investments, Zephyr Peacock India, adding, “Such trends have accelerated digitisation in the industry and investment has followed this trend, hence the increasing interest and investment into construction tech. Further, start-ups in construction tech have matured in the evolution curve and are raising larger rounds, which are also getting reflected in the amount of funding in this year.”

Construction tech essentially includes firms that create tools to execute any construction project — it encompasses marketplaces or platforms that aid in procuring physical and human resources needed for a construction project. It also includes companies that provide technologies such as 3D printing, robotics and modular construction, and tools that reduce human dependency, help execute projects in a shorter time span and at a lower cost.

Covid impact

The pandemic and the subsequent lockdowns resulted in a decline in the construction sector’s output in 2020. However, the sector began to recover towards the end of the last year.

According to data from the Ministry of Statistics and Programme Implementation, the construction segment grew by 6.2 per cent in the October-December quarter compared to a 7.2 per cent decline in the July-September quarter and a 49.4 per cent decline in the April-June quarter in 2020. That apart, the government’s increased allocation of ₹5.54 lakh crore in the FY2021-22 Budget towards capital expenditure (a 34.5 per cent increase from the ₹4.12 lakh crore allocated in FY2020-21) could aid demand for the construction tech space as well.

Ankur Bansal, Co-founder and Director, BlackSoil, said that tailwinds from pickup in state capex and strong construction activity picking up in other sectors such as ports, metros, and airports could aid demand for construction equipment and services, adding, “Construction tech is likely to play a key role in this scenario in managing challenges such as remote communication, unorganised work structures, site budget control, resource and time management, etc, thus attracting further investments towards this segment.”

Residential construction

Yojak, SmartVizX and Infra.Market are the three construction tech start-ups in India that have received funding so far this year, per data from Tracxn. Experts said that with many people still largely working from home, customised features in residential construction will be in demand.

Mishra said in the construction sector, while segments such as commercial construction will see a dip, residential construction, especially smaller residential constructions, have already picked up.

“With work from home and expectation of hybrid work models going forward, customers will start looking for more customised solutions in residential construction,” he said.

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