India has witnessed tremendous growth in residential complexes, hospitals, IT parks, educational institutions, laboratories, airports, corporate offices, and government buildings. This is putting enormous pressure on the resource demand such as energy, water, materials, and cost. The boost in Indian construction sector and urbanization after the financial crisis has created a huge demand for elevators. With millions of people relocating to cities each year there is an increasing scarcity of land and buildings growing taller resulting into the high demand of elevators. Elevator companies are increasingly focused on offering complete and reliable solutions looking at the rapid increase in diversity and growth in Indian realty market.
Five years ago the situation was very different. The elevator business in the country had slumped, following the slowdown in the real estate market. Manufacturers had to bide time for a recovery, as their fortunes are linked to home sales, especially high-rise residential apartments. Almost 60% of projects that were launched before 2008 in cities like Mumbai, NCR, Chennai and Bangalore, were delayed by more than two years, But many of these projects are finally reaching the end of the construction cycle.
India has continued to register economic growth of 5-6 percent in the last 2-3 years, despite the global recession. Owing to this growth, the real estate market in India is expanding at a fast pace. Real estate projects in India that touched USD 100 Billion in 2010 is expected to touch USD 265 Billion in 2020. But this year growth rate is again slumped down and direct effect can be seen on elevator industry also. Adding to growth of the real estate market, the Government’s push to improve infrastructure in the 12th Five Year Plan (FYP) has also been a major boost to the elevators and escalators market. The Government of India has approved the 12th FYP that aims to achieve an annual average GDP growth of 8.2 percent between 2012 and 2017. Although this GDP growth has been downgraded in the recent past to 4 percent. That is big concern for real state market and elevator market also.
"There has been growth in demand from tier II & III cities and we do not envisage any delay in smaller projects. Rescission is affecting real estate market also effect is not that much strong as like three years ago but as the realty market changing it will affect our margins but not the volumes," Said Mr. Sahadevan - DGM sales and marketing Escon Elevators.
Currently, metros like Mumbai, Delhi-NCR, Bangalore and Chennai, drive the demand for elevators with a 60% share while the rest comes from smaller towns like Bhopal, Nagpur, Indore, Aurangabad and Surat, where the real estate business has been growing.
One of the key Mega Trends unfolding in India is Urbanization. Under this, the four main trends are: development of Mega Cities, Mega Regions, Mega Corridors and Mega Slums, which is anticipated to give a strong impetus to the elevators and escalators market. Frost & Sullivan estimates that this trend will have a sustained impact and set the stage for visionary innovation, transformation of societies, markets and cultures.
India is expected to have 25 Mega Cities with a population of 8 million or more and a GDP of USD 250 million. When cities combine with suburbs or other nearby cities, Mega Regions are created. India is expected to witness the creation of four Mega Regions by 2025, each with a population of over 15 million. Few notable Mega Regions would be:
· New Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad with a combined population of 28.5 Million
· Mumbai and nearby towns of Bhiwandi, Kalyan, Thane, Ulhasnagar together with a population of 34.4 Million
This expansion will definitely affect Real estate market in positive manner and when Real estate market will grow in a high pace elevator industry will also grow simultaneously.
Currently the elevators market in India is clocking sales of about 40,000-45,000 units per year, compared to 14,000-15,000 units 10 years ago. The strong growth witnessed in the residential real estate segment is boosting this market. "The residential real estate segment contributes to more than 50 percent of elevator sales in India. With several cities and state governments pursuing reforms to relax norms for environmental clearances, higher multi-storeyed buildings on smaller roads and lanes will soon become a reality. High-rise apartments are being touted as a panacea for rapidly overcrowding cities and the elevators market is expected to grow at 15-17 percent in the next 5-7 years", said Frost & Sullivan's research analyst.
The commercial segment, particularly office space and mall space, has remained flat and shown signs of slowdown in the recent past. However, new office space, malls, hospitals, hotels, and residential projects will be back on track once the credit rates and inflation soften. In major cities, horizontal growth is limited and municipal corporations are finding favor with construction of high-rises, augmenting elevators and escalators market.
The Indian elevators and escalators market has enough space for all major manufacturers in this sector to grow and succeed. In this scenario the best practice would be to undertake a comprehensive market due diligence investigation covering industry analysis, customer analysis, and competitor analysis before embarking on a long-term strategic road map.
