The central government has often reiterated its focus on construction, particularly infrastructure development. The National Infrastructure Pipeline and the government’s flagship construction programmes Bharatmala and Sagarmala Pariyojana, the PM Gati Shakti National Master Plan, the construction of dedicated freight corridors and high speed rail systems, and the development of greenfield airports, ports and urban rail-based transit systems have created a number of opportunities in the construction sector.
The ongoing digitalisation in the construction market also indicates the need for enhanced data centre capacity over the next few years. As a result, investments and construction activity in the sector are poised to increase substantially. For instance, Adani Enterprises, despite being a relatively new entrant in the data centre market, has announced an investment of around Rs 500 billion over the next 10 years to set up a 1 GW hyperscale data centre in Maharashtra. An additional Rs 50 billion has been announced for setting up a 100 MW data centre in Telangana.
Infrastructure-specific sectors apart, the burgeoning housing market is expected to drive the industry as well. Several new projects have also been announced, including the GIFT City in Gujarat, the Surat DREAM City, and the Dholera SIR. Furthermore, several construction projects across roads, railways, airports, ports, urban rail, etc., have either achieved significant milestones or are currently advancing rapidly towards completion.
With key developments like these, the construction sector’s real gross value added (GVA) has been estimated to grow at a rate of 8.6 per cent in 2024-25, reaching Rs 15.59 trillion.
Overview of the financial landscape
The construction sector attracts 100 per cent foreign direct investment (FDI) through automatic routes. The sector has seen the highest FDI investment of Rs 613.57 billion in 2020-21, majorly driven by the rise of FDI investments in warehousing. In 2023-24, the sector saw an FDI inflow of Rs 371.89 billion.
This apart, over time, higher capital expenditure by the government, mature and revised model concession agreements, and stronger regulatory frameworks have improved the confidence of banks, particularly in infrastructure projects. To put numbers into perspective, non-performing assets (NPAs) were at a peak of 30 per cent during 2015. Currently, the gross NPA ratio of the sector has reduced to a multi-year low of 2.8 per cent as of March 2024, showing an overall improvement in asset quality and reduced risk of slippage. Further, outstanding as of March 2024, gross bank lending to the infrastructure sector stands at
Rs 13 trillion.
Interestingly, during 2024, the cement sector, a key material market in India, recorded over 10 acquisition deals, the highest since 2014, with investments exceeding $3.5 billion. As per media reports, led by UltraTech Cement and Ambuja Cements, 11 transactions were focused primarily in the south India market. All these deals are aimed at increasing the concentration of cement assets among key players in the sector.
Tracking CE sales growth 
Continuous infrastructure development catapulted construction equipment (CE) sales to unprecedented heights in 2023-24, with volumes surging by 26 per cent to 135,650 units; this was driven particularly by accelerated construction in the pre-election phase.
However, 2024-25 witnessed a shift in this trajectory. Implementation of the Model Code of Conduct, coupled with muted project awards and construction activity, dampened first-quarter demand. An extended monsoon further decelerated growth in the second quarter, resulting in a modest 3 per cent year-on-year increase to 59,588 units in the
first half.
The CE market relies heavily on road construction, which drives 35-45 per cent of India’s equipment sales, followed by mining at 20-30 per cent, real estate at 10-20 per cent and other sectors such as railways, water supply and power. Road projects, in particular, fuel demand for earthmoving equipment, representing 70 per cent of the total CE volume.
While sluggish road project awards in 2024-25 tempered equipment sales, the mining sector presented a silver lining. Due to rising energy demands, coal production climbed 6.11 per cent to 726.29 mt in December 2024, signalling robust mining activity compared to the previous year’s 684.45 mt.
The rise of sustainable construction
It is now a well-known fact that the decarbonisation of the construction sector is necessary to reduce India’s carbon footprint by 30-35 per cent by 2030, and achieve net zero targets by 2070. In fact, many proactive steps are being taken in this space. Of late, the adoption of eco-friendly construction materials such as bio-bitumen, fly ash, plastic and urban solid waste is driving sustainability. To this end, as of January 2025, eight major roads in Kerala are being revamped using eco-friendly German full-depth reclamation (FDR) technology for recycling existing road materials and reducing new resource consumption while ensuring durable, low-maintenance roads with minimal environmental impact. Airports in India are also taking a more sustainable approach to their operations by using green steel, green cement, fibreglass, fly ash, bamboo and recycled plastic waste. Additionally, many terminal buildings at different airports, for example, Kanpur airport, are equipped with solar panels. In a similar vein, “tunnel muck” is being utilised in the construction of the Udhampur-Srinagar-Baramulla Rail Link (USBRL) project, ultimately reducing emissions by 80 per cent.
With many proactive mandates in place to ensure the use of alternative construction materials in core construction sectors such as roads, railways and airports, warehouses too are now following the same footsteps. Buildings made of concrete and cement are taking a back seat while pre-engineered buildings (PEBs) with steel structures are increasingly being used. Further, the use of green energy is being encouraged in the development of ports with the recently launched Harit Sagar Green Port Guidelines.
Moreover, there has been a shift towards electric construction equipment. In September 2024, Kobelco Construction Equipment India launched SK80, an India-made 8 tonne category excavator, with features such as superior technology, advanced hydraulic system, operator comfort, durability, maintenance and better fuel efficiency with lower fuel consumption and emissions. Similar developments are now being supported by the government through the Ministry of Road Transport and Highways’ (MoRTH) new rules requiring all electric construction vehicles, including dumpers and excavators, to comply with strict safety standards starting October 1, 2024. The amendment introduces a new rule, 125-O, which mandates compliance with the Automotive Industry Standards (AIS)-174 that focuses on battery safety, electrical systems and overall vehicle design.
While these regulatory changes will increase equipment costs, they are expected to deliver long-term benefits. Vehicles complying with higher standards will not only gain a competitive edge in global markets but also promote climate-conscious practices, aligning the industry with global sustainability goals.
The adoption of circular economy principles is also gaining momentum in the industry, focusing on optimising resource utilisation, reducing waste generation, and promoting the reuse and recycling of materials.
Tapping technology potential
For a long time, a key challenge plaguing the construction sector has been the reluctance to acclimatise to the available mechanised construction techniques across infrastructure projects. As an alternative to adopting high-priced but effective technologies, contractors have exhibited a preference for deploying cheaper labour.
Fast-forward to the present, there has been a notable shift in the contractor mindset with respect to how the construction business should be conducted in modern times. All stakeholders understand the long-term benefits of deploying technology across various stages of project development.This shift has ensured the timely completion of projects as well as quality of assets. The construction practices that have evolved significantly in recent times are in areas such as protective equipment, efficient technology, modular and off-site construction and the use of digital technologies such as building information modelling (BIM).
By employing internet of things (IoT), smart cities now make sure that a city maintains traffic flow, reduces energy consumption, and improves security. Smart traffic management systems using IoT and artificial intelligence (AI) can sense and dynamically manage movements, which can greatly reduce congestion and emissions. In addition, IoT-enabled infrastructure monitors the health of bridges, roads, and buildings, in general, and predicts maintenance requirements. This apart, smart roads, equipped with sensors, cameras, and communication systems, can enable real-time traffic management, while also enhancing the overall driving experience. The Jewar airport, Bangalore airport, Terminal 3 of the Delhi airport as well as many warehouses have employed BIM. Furthermore, ports in India are being developed and upgraded as smart ports with the integration of digital solutions. Automatic gates and drive-through container scanning systems are being built at ports to optimise the movement of truck cargo and help them become more sustainable. Additionally, the use of drones for field surveys and differential GPS-based LiDARs is facilitating pre-construction activities across different construction projects.
Meanwhile, BIM, advanced analytics, drones, and IoT digital systems are being increasingly utilised by metro rail corporations. The Nagpur metro achieved 5D-BIM integration through iTWO, which provided an integrated view of the project by linking the 3D model, project schedule, and cost. Indian Railways is also using advanced technologies to enhance efficiency, cost-effectiveness, and safety in the design, construction and maintenance of railway infrastructure. India’s first vertical lift railway bridge, the new Pamban bridge, uses a system of counterweights and cables to move an interior lift span section that remains horizontal as it is raised up and down like an elevator, allowing river traffic to pass beneath the structure.
The way forward
The unprecedented rate of urbanisation will propel the pace of construction in the coming years. The government is focused on benchmarking eco-friendly practices by introducing new measures and promoting the existing ones. Looking forward, the Indian construction sector will play a crucial role in supporting the nation’s broader economic goals, providing employment, and enhancing overall connectivity through vital infrastructure projects.
The key to uninterrupted construction activity also lies in ensuring that infrastructure development continues unabated. Despite sector-specific challenges, the industry is making progress towards overcoming inefficiencies and delivering high quality, sustainable infrastructure. Furthermore, the government is making efforts to improve the availability of affordable housing by offering subsidies. This initiative is promoting construction in smaller towns and cities in the country. Ongoing initiatives in both residential and industrial sectors, such as the Central Vista Redevelopment Project in Delhi, significantly contribute to the ever-evolving construction equipment industry in the country.
Going forward, it will be essential to strike a balance between construction activities and environmental conservation to effectively reduce the country’s carbon footprint. Sustainable materials and construction practices are expected to garner even more attention in the future. The positive outlook for the future reflects the combined efforts of government policies, funding mechanisms, and private sector engagement.
While currently there is some uncertainty regarding the pace of construction activity, growth in equipment sales and the rate of target completion across various sectors, the long-term outlook for the construction sector remains promising, with a robust line-up of projects and execution likely to accelerate in the last quarter of 2024-25.
Harman Mangat
