BUILDING & CONSTRUCTION MARKETIN INDIA

Madras Consultancy Group

Chennai, India

Building Materials : Overview

● Building materials constitute anywhere between 50 to 75 % of the

total cost of construction, in India

● The combined market value of cement, bitumen, iron and steel,

chemicals, bricks, paints, tiles etc is estimated at INR 2,500 billion

annually

● Building material usage which is largely accounted by the domestic

housing sector, has its own unique characteristics, e.g. :

- Use of burnt bricks, with cement plastering as the primary

material for walls

- Extensive use of traditional, locally available materials like

timber, bamboo, palm leaves, mud, stones, etc., in rural areas

Real Estate - Overview

● The Indian real estate market was expected

to reach $50 billion by 2009-10

● Real estate potential in India:

- The market was expected to grow at a CAGR

of 33% across 2005-10

- Housing: About 20 million new units were

expected over the next 5 years

- Office space: Five-fold increase in office space

over the next five years

- Retail space: Mall space to increase by 70

million sq. feet over the next few years

- Hotels: Over 1,50,000 new hotel rooms in the

next five years

Residential Units - Growth Trends

● Growth in population, urbanization and income have driven the demand for non-slum houses across India

● Housing stock was estimated at 255 million units in 2007, and was expected to reach 286 million units by 2011, at a CAGR of 3.0% per annum; to add an average of 7.7 million residential units annually

● A planning commission survey report indicates a shortage of about 24.7 million houses in India in 2007

Increase in Commercial Space

● By 2010, the IT-ITES sector added more than a million people. Consequently, creating office space demand of 100 million plus square feet

● The demand for office space is expected to go up to 500 million sq feet in the next ten years

● The non-IT and manufacturing sectors are also migrating from legacy buildings to Grade-A office spaces. This is expected to account for 30-40% of India's commercial real estate demand over the next decade

Increase in Retail Space

● India ranked first in the 2005 Global Retail Development Index across 30 emerging global markets

● India's organized retail sector was expected to grow around 25% to 30% over the next five years

● The available mall size of about 40 million sq feet was expected to increase to 100 million sq. feet by 2010

● The number of malls in Mumbai, Bangalore, New Delhi and Pune was expected to reach 250 by 2010

Increase in Hotels

● Occupancy rates in Indian hotels was around 80%. The hotel industry is facing an acute shortage of rooms

● To match the burgeoning demand for accommodation in business centers and tourist attractions, a huge growth was expected in the hotel industry

● An estimated $ 11.5 billion investment was expected in this sector over the next two years

● 40 international brands were likely to establish their presence in India by 2011

Cement Industry : Overview

● The Indian cement industry dates back to 1914, and the first unit was put up in Porbunder, Gujarat

● India is the second largest producer of cement in the world, and has an installed capacity of around 196 million tonnes per annum (2007-08)

● The per capita consumption of cement in India was at 135 kgs and is the lowest, compared to the world average at 250 kgs, thus offering scope for future growth

● An additional capacity of around 115 million tonnes was expected to be added by the end of 2012

● The cement industry accounts for approximately 1.3% of the country's GDP

Installed Capacity & Production (2006-07)

Million Tonnes

● Installed capacity 178.0

- Large Plants 167.0

- Mini Plants 11.0

● Production 162.0

- Large Plants 156.0

- Mini Plants 6.0

Major User Segments

Export & Import Trends : (2001 - 2006)

● Threat of imports not very much - due to weight & bulk - transportation problems

INR Million

Export Import

2001 - 02 4,512 92

2002 - 03 5,755 42

2003 - 04 8,460 93

2004 - 05 10,285 82

2005 - 06 11,153 139

2006 - 07 11,474 654

Ceramic Tiles : Overview

● Ceramic Tiles forms an integral part of the home decoration

● India ranks 5th in term of ceramic tiles production in the World

● The ceramic tile industry is divided into organized and unorganized sector. The unorganized sector accounts for 55% of the total Industry

● The industry turnover was estimated at INR 65.0 billion in 2006-07 & INR 86.0 billion in 2007-08

● Domestic production of ceramic tiles was estimated at 340 million sq. meters in 2006-07, compared to the Global production at 6.9 billion sq. meters

● Per capita ceramic tile consumption in India was 0.30 sq. m per annum as compared to 2 sq. m. per annum in China and 5 to 6 sq. m. per annum in European countries and 2.5sq.m per annum in brazil(2006-07)

● The industry witnessed a growth rate of 15% per annum compared to the Global growth rate at 6%

Tiles : Industry Structure

● There were around 16 players in the organized sector, and around 200 in the unorganized sector (70% based in Gujarat region)

● Industry divided broadly into Wall tiles & Floor tiles Vitrified tile and Porcelain tile segments:

Tiles Industry : Production (2006-07)

Sanitaryware : Overview

● Sanitaryware market in India was estimated at INR 25 billion (2006-07)

● India accounted for 8% of the world's sanitaryware production

● India's production for the year 2006-07 was 22 million pieces, while the global production stood at 300 million pieces

● The Global sanitaryware industry was expected to grow at 5 - 7% per annum, compared to India's at 12 to 15% per annum

● Indian sanitaryware industry can be broadly classified into the organized segment and the unorganized segment; the organized sector accounted for the largest share of the market at 60%

● The branded segment grew at 15% per annum, while the non-branded segment witnessed a lower growth rate of 8-9% per annum

Key Statistics (2006-07)

Sanitaryware : Overview

● The Orissa pan accounted for 45% of the sales

● IWC's have been almost fully replaced by Orissapans

● Orissa Pan and IWC - primarily for rural / semi urban markets

● EWC's to a large extent is limited to Urban markets - but have steadily increased their market driven by gradual change in consumer preference

● Urinals limited to the institutional markets

Bathroom Fittings & Accessories : Overview

● Bathroom fitting market was estimated to be worth INR 15 billion (2006-07)

● Organized bath fittings market was estimated at around INR 5 billion and was growing at 13.5 %

● Almost all the manufacturers of bathroom fittings are located in North India.

● Manufacturing clusters are located in:

- Delhi

- Chandigarh

- Mathura, UP

● Industry dominated by unorganized sector

- Number of players in the unorganized segment exceeded 200

Major Products : Bath Fittings

● Pillar cock (wash basin taps)

● Bib cock (bathroom taps)

● Stop cock (used for shower)

● Basin mixers (are fitted in wash basin to mix hot and cold water)

● Wall mixers (are fitted in bathroom walls used to mix hot and cold water)

● Diverter (directs the flow of water to the bib cock, shower, etc.)

● Spout (outlet for water without a control knob)

● Flush valves (used to control flow of water to the flush)

● Angle valves (fitted below the wash basin to control flow of water)

● Bidet fittings

Paints : Overview

● Domestic market was estimated at around INR 95 billion (2006 - 07)

● Indian share in global paint market was 0.6%

● Per capita consumption - 0.5 kg - much lower compared to other countries :

- Global - 15.0 kgs

- China - 1.6 kgs

- Thailand - 4.0 kgs

- South Korea - 10.0 kgs

- USA - 27.0 kgs

● Present growth rate : 15%(2008)

● The organized sector accounted for 70% of the market while the unorganized(small scale units) accounted for rest of the market

Major Categories

Technology & Raw Materials

● Raw material costs account for 60 % of the total cost

● In small scale units it forms up to 70% of the net sales

● Industry use around 300-400 types of raw materials; 3 major groups

- Pigments, Solvents, Resins & Additives

● Major Raw Materials

- Titanium dioxide, Pthalic Anhydride (PAN) , Pentaerythritol (PE), Paraxylene, Orthoxylene, Turpentine, White Sprit, Glycerine, Penta Butanol

- Titanium oxide is the important raw material for paint; of the production 60% is consumed for the paint production

- The paint industry presently imports Titanium dioxide in excess of INR 1 billion

Production Trends (2000 - 2006)

Glass : Overview

● The country had a total flat glass manufacturing capacity of 950,000 tonnes per annum. Float glass had larger share of the capacity at 80% compared to sheet glass at 20%

● The production of flat glass during 2006-07 was estimated at 667,000 tonnes per annum

● Market Size : INR 32 billion ( 2006-07)

India's per capita consumption of float / sheet glass was the lowest in the world, only 0.8 kg compared to other countries such as Thailand (5.2 kg), China (3.5 kg), Malaysia (2 kg) and Indonesia (2.5 kg)

● The glass business in India comprises three segments:

- Float glass - basic raw glass

- Automotive glass - value added float glass for automotive applications

- Architectural glass value added float glass used for various applications (eg. buildings and offices, mirrors, reflective glass etc.)

Flat Glass Production : (2001-2006)

Export & Import (2001 - 2006)

Lighting : Overview

● The INR 50 billion Lighting industry in India is divided into

- Light sources (Lamps) 70% share

- Lighting fixtures (Luminaires) 30% share

● The lighting industry in India grew at 20% per annum over the last two to three years

● The market for luminaires was estimated at INR10.0 billion in 2006-07, and includes products such as Lourves, Reflectors, Chokes and Ballasts etc.

● Major players in this sector were Bajaj, GE India, Crompton Greaves and Philips

Production (2006)

Quantity : Million pieces

Source : ELCOMA

*SS Sector for CFL also includes import as well assembled CFL

Steel : Overview

● The birth of the Indian steel industry and commencement of large scale steel production can be dated back to 1907, when Tata Iron and Steel Company(TISCO) set up their steel plant at Jamshedpur

● Liberalisation in 1991 ushered in de-licensing, price decontrol, lowering of import restrictions, lowering of duties, and abolition of freight equalisation;

● Steel industry was delicensed and decontrolled in 1991 & 1992 respectively

● India was the 7th largest producer of steel in the world and the 4th largest producer of iron ore

● India was also the largest producer of sponge iron in the world

● Per capita consumption of steel in India was at around 35 kg, and is much lower than the world's average of 150 kg and China's average at 300 kg

Industry Structure

Steel industry is broadly classified into

● Long products : Angles, Channels, Rods, Bars etc.

- Used primarily by the construction sector (major product is cold twisted bars), general engineering / fabrication, transmission towers etc.

● Flat products : Hot Rolled (HR) Coils, Cold Rolled (CR) Coils, Plates etc.

- User segments - Automobiles, General engineering / fabrication,

Consumer durables, Packaging

● Tube & Pipe are made from HR / CR sheets / coils

Semi finished : Billets,Blooms,Rods etc.

Capacity & Production : (2006-07)

Capacity

- Primary Sector : 51 MTPA (2006-07)

Production, Exports & Imports

2006-07

( Mn tonnes )

Pig Iron : 7.0

Sponge Iron : 16.3

Finished Steel : 45.0

2006-07

Steel ( Mn tonnes )

Exports : 6.8

Imports : 6.8

Important Note !

This demo pack, extracted from presentation entitled "Building &

Construction Market in India" was prepared by Madras Consultancy

Group in 2008. The information presented herein is intended to provide

the reader a flavor of the Indian market and has been collated from

various published sources & MCG's own library. Prior to undertaking any

business or investment decisions

on the Building & Construction market in India, further detailed

investigations / studies are recommended. This note remains MCG's

intellectual property & no part may be reproduced or circulated on

electronic media, in print form or by email without the prior permission of

Madras Consultancy Group, 1A, Ananya, No.41/17, I Avenue, Indira

Nagar, Adyar, Chennai 600 020, India.

www.consultmcg.com