Page 62 - Built Expressions - Online Construction Magazine - November 2014 Issue

Cover Feature kilometres of road for every square kilometre of land area. However, the country still lacks high-quality roads, including highways with four or more lanes, which offsets the benefts of high road density. Of the total road length of 4.6 million kilometres, 60% of the roads are rural (by length). National highways account for only 2% of the total length, of which less than a quarter are multilane highways. Figure 2 compares India’s road density with other countries and gives a snapshot of length by various road categories in the country. Road construction is one of the most intensive sectors for ECE, Figure 2 which accounts for up to 15 to 20% of project costs. With high investments expected to pour into this sector over Financing Models in India the next few years, spending on ECE • Loans are mainly provided by banks and non-banking fnancial companies. for road projects is also likely to get a Similar to vehicle loans, a margin is paid up front, and monthly payments are boost. If investments planned in the 12 th made over three to fve years. FYP materialize as expected, nearly a • Leases are gaining popularity because of tax benefts. There are two options: In quarter of the construction equipment a fnancial lease, the asset is transferred to the lessee at the end of the leasing feet will need to be deployed on an period. In an operating lease, the asset is returned to the lessor. Only 3% of annual basis—just to support road leases are operating leases because fnancial frms often can’t maintain the construction projects. equipment. • Suppliers’ and buyers’ credit is often used for imported equipment because of its Urban Infrastructure: Urban high cost, mostly fnanced by Indian and overseas banks. Centres and Mass Transit • A rent-to-own transaction allows users to pay a rental fee (a %age of the Urbanization is one of the strongest machine’s price) at periodic intervals with the option to buy at the end of a indicators of a country’s economic specifed period. growth, modernization, and • End-to-end solution providers are fnancing frms that help with acquiring, development. In India, large-scale training for, maintaining, and buying back used equipment. urbanization over the past decade has resulted in an urban population of nearly 377 million people in 2011 frugal designs tailored to domestic Reaching this potential will require with 53 urban centres (cities with a needs. This will go a long way to addressing some tough challenges in population of more than one million). improve margins for suppliers the infrastructure sector and resolving However, with an urbanization rate otherwise constrained by low-cost issues in the ECE ecosystem. Best of 30%, the country trails several sourcing from other countries. practices from other countries can developed and developing economies, point the way, but India’s success will including Japan, the United States, The Road Ahead depend on close collaboration among Malaysia, and China (see fgure 3). Under-penetration for most key government, industry, and regulatory This gap presents a huge potential aspects of India’s infrastructure bodies to ensure the challenges are for urban growth. Over the next two highlights the need for development. ironed out in time to realize the vision decades, at a forecasted compound The government has signalled its for the country’s infrastructure. annual growth rate of 2.4%, the urban intent by earmarking $1 trillion population could reach 600 million th for infrastructure in the 12 Five- Demand Drivers by 2030–2031, according to several Year Plan, but restricted sources for Transportation Infrastructure: global studies. This will result in an funding could delay achieving targets Road and Rails urbanization rate of more than 40% in certain areas. Regardless, the India has one of the highest densities with 85 to 90 urban centres. Such opportunity is huge for ECE players. of roads in the world, with 1.42 explosive growth will need to be PG 62 Built Expressions Vol: 3 Issue: 11 November 2014