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Construction and Related Engineering Services

Infrastructure sector plays and important role in the growth and development of Indian economy. Nearly, 9% of India’s GDP is spent on Infrastructure services. It comprises of construction of power, bridges, dams, roads and urban infrastructure development which also forms as base and supporting factor for other services sectors. As infrastructure is highly responsible for propelling growth of other sectors and India’s overall development, Government of India is giving huge impetus for development of Infrastructure and construction services through focused policies such as open FDI norms, large budget allocation to Infrastructure sector, Smart cities mission, etc. India has become a large market for Infrastructure and Construction activities with the contribution of US $ 738.5 Billion in the FY2017 and is expected to become 3rd largest market in the world by 2025 (KPMG Infrastructure Report). 

Infrastructure and construction sector has the 2nd largest share in in FDI inflows. Cumulative FDI inflows in the Construction Activities sector, which includes infrastructure, reached US$ 13.11 billion between April 2000 to June 2018 and in the Construction Development sector reached US$ 24.87 billion. Construction services exports has also increased from US $ 1004 million in 2012 to 2256 million in 2018. Infrastructure related activities witnessed strong growth during 2017- 18. 

  • National highway construction recorded the highest increase of 20 %. 
  • Freight traffic handled by Indian Railways increased 5.89 %  Year-on-year during April-July 2018(P) to 396.86 million tonnes.  
  • Cargo handled by major Indian ports increased by 5.13 % during April-August 2018.  
  • Electricity generation in the country increased by 3.84% during April-July 2018. 


India Infrastructure Market Revenues (US$ Billion) 

india infrastructure


Focused sectors under Infrastructure and Construction services 


under Infrastructure and Construction services


Sector Trends

  • Highway network in the country is expected to cover 50,000 km by 2019. All villages in India will be connected through a road network by 2019 under Pradhan Mantri Gram Sadak Yojana (PMGSY)


  • Indian Real estate sector in India is expected to reach a market size of US$ 180 billion by 2020 and US$ 1 trillion by 2030. It is expected to contribute 13% of the country’s GDP by 2025.
  • Services sectors such as IT and ITeS, retail, consulting and e-commerce have registered high demand for office space driving growth of real estate services in the country.
  • Installed capacity increased with CAGR of 9.1% in FY07–18 and stood at 344 GW for FY18.
  • Indian energy sector is expected to offer investment opportunities worth US$ 300 billion over the next 10 years.
  • According to Census of India, 50% India will get urban by Year 2050; as compared to around 31% currently.
  • Initiatives such as Housing for all, Smart Cities, etc. are fuelling the growth the Urban Infrastructure and construction development.
  • Housing for All by 2022, the government’s flagship scheme PMAY launched in June 2015 aims to build 20 million urban homes and 30 million rural houses by 2022.
  • In March 2018, construction of additional 3, 21,567 affordable houses was sanctioned under PMAY.



References - Data and reports available in the public domain including Ministries Annual Reports and Data Statistics, IBEF Sectoral Reports, Department of Industrial Policy and Promotion (DIPP), RBI Handbook of Statistics on Indian Economy, Media & Industry Reports, Press Information Bureau (PIB), Union Budget 2018-19

Disclaimer - This information has been collected through secondary research and is available in the public domain. We are not responsible for any errors in the same.

Growth Drivers/Advantages for India




Rising Investments

In recent years, India has emerged as one of the most attractive destinations for doing business and making investments. India ranks among the top 10 FDI destinations globally.

FDI inflows in the Construction Activities sector, which includes infrastructure, reached US$ 13.11 billion between April 2000 to June 2018 and in the Construction Development sector reached US$ 24.87 billion.

100% FDI is allowed in Infrastructure development projects such as townships, housing and built-up infrastructure and construction developments.


Infrastructure Needs

India is the fastest growing major economy in the world in 2018 and 2019. 6th largest economy in the world by nominal GDP and 3rd largest economy globally by PPP. With large share in world FDI inflows and Trade, demand of strong Infrastructure is essential. 

Investment worth Rs 50 trillion (US$ 777.73 billion) is required in infrastructure by 2022 to have sustainable development in the country. Sectors like Ports Development, power transmission, roads & highways and renewable energy will drive the investments in the years to come. 


Public Private Partnerships (PPP)

PPP in infrastructure space have increased and are expected to grow even further. Private equity and venture capital (PE/VC) investments in the infrastructure and real estate reached US$ 3.9 billion with 29 deals during the first half of 2018.Indian infrastructure sector witnessed 91 M&A deals worth US$ 5.4 billion in 2017.

Investment worth Rs 50 trillion (US$ 777.73 billion) in infrastructure is required by 2022 for country’s sustainable development.


Government Initiatives

The Government of India is expected to invest highly in the infrastructure sector, mainly highways, renewable energy and urban transport. High Budget allocations, Smart City Mission, Pradhan Mantri Awas Yojana, new metro rail policy, Housing for all, North East Special Infrastructure Development Scheme (NESIDS), etc. are some important initiatives taken by government which is driving the growth of India’s Infrastructure sector.


Improvement in Logistics

Indian logistics sector is growing 10% annually and is expected to reach US$ 215 billion in 2019-20. Rising Logistics services, increased demand of supporting Infrastructure such as Shipping Ports, Railways and Roadways connectivity.

In 2016, India jumped 19 places in World Bank's Logistics Performance Index (LPI) 2016, to rank 35th amongst 160 countries.


Sector Contribution to Economy

Infrastructure and Construction services has contributed significantly to GDP, Employment, Trade and Investments. A significant share of Gross Domestic Product comes from Infrastructure sector and huge revenues are generated in India from Infrastructure market.



As per Confederation of real Estate Developers Association of India (CREDAI), Indian Construction and real estate sector is the second largest employer after agriculture and is expected to add 32 million jobs to the existing 45 million in the next five years. Real estate development industry, which currently contributes at least 9% to India’s gross domestic product (GDP) is one of the largest seasonal employment providers in the country.



Construction Services have strong presence in India’s export basket. Exports of construction services from India has increased two-folds between FY12 to FY18 from US $1004 million to US $2256 million. Many Indian Construction companies have established strong presence around the world and are adding significantly to balance of payments receipts such as Larsen & Tourbo, Engineers India, Gammon India, etc.


Data Graph


Foreign Direct Investment

Construction Development is among top 5 services sectors attracting highest foreign investments. Between April 2000 and March 2018, total of US $24,832.65 million of FDI has been received in Construction Development. To ensure that India remains an attractive investment destination in Infrastructure and Construction Services-

  • Government permits 100% FDI under automatic route, 100% tax deduction on profits to an undertaking in a housing project approved from June 2016 to March 2019 and completed in 3 years, subject to certain conditions.
  • 100% FDI allowed in Roads and Highways construction projects.
  • 100% FDI allowed under the automatic route for Greenfield and brownfield airport projects.
  • 100% FDI allowed in the railway infrastructure segment, subject to certain conditions.

Construction Activity

Government Initiatives


Union Budget 2018-19

Under Union Budget 2018-19, Government of India has given a massive push to infrastructure sector by allocating Rs 5.97 lakh crore (US$ 92.22 billion).

  • Roadways - Rs 1.21 lakh crore (US$ 18.69 billion) is allotted for development of national highways across the country.
  • Roadways - Indian Railways received the highest ever budgetary allocation of Rs 1.48 trillion (US$ 22.86 billion) out of which Rs 1.46 trillion (US$ 22.55 billion) is allocated for capacity creation and redevelopment of 600 railway stations.
  • Saubhagya scheme to achieve universal household electrification in the country. Green Energy Corridor Project and Telecom Infrastructure has been given special attention.

Initiatives with respect to different Infrastructure and Construction sectors are as follows-



Doubling of 18,000 km of Railway tracks, to avoid capacity constraints in the railways network.

New Metro Rail Policy was approved in August 2017 mandating PPP component in new projects.

Monorail - Monorail has made its beginning in India with Mumbai being the first city in the country to have this transport system in place. Monorail Projects are being developed in Chennai, Pune, Thiruvananthapuram, Bengaluru, Thane, Delhi, Port Blair, Dehradun, Chandigarh etc.

Road Development

Road Development

North East Special Infrastructure Development Scheme (NESIDS) North East Special Infrastructure Development Scheme (NESIDS) approved by GOI with 100% funding from the central government for infrastructure projects in the region. Highway projects worth US$ 22.6 billion would be undertaken in north-east region of the country.

2,000 kms of coastal connectivity roads have been identified for construction and development. Road projects worth US$ 107.64 billion approved in October 2017.


Telecom & Energy

Investment of Rs 10,000 crore (US$ 1.54 billion) has been allocated in Union Budget 2018-19 for creation and augmentation of telecom infrastructure in the country.

Strategic Crude Oil reserves capacity will be increased to 15.33 MT.

Solar Park Development, an additional capacity of 20,000 MW will be generated in the second phase.


Housing and Urban Development

“Smart Cities Mission” of Government of India is an urban renewal and retrofitting program with the mission to develop 100 cities across the country. Rs 2.05 lakh crore (US$ 31.81 billion) will be invested by GOI to make 100 cities citizen friendly and sustainable. 100 smart cities and 500 cities are likely to invite investments worth 2 trillion INR in the next 5 years.

“Housing for All” programme, launched in June 2015 aims to build 20 million urban homes and 30 million rural houses by 2022. National Housing Bank will refinance individual housing loans of about US$ 3.1 billion in 2017-18. 60 million new homes are expected to be built in India between 2018 and 2024.

“Pradhan Mantri Awas Yojana (Urban)” aims the construction of additional 150,000 affordable houses to ensure a good living habitat for the poor in the country


Airport Development

Airports in Tier 2 cities will be taken up for operation and maintenance in the PPP mode in the coming years.

The Airports Authority of India aims to bring 250 airports under operation across the country by 2020. With investment of US$ 3.2 billion (2018-2022), AAI aims to build new terminal and expand capacity of existing ones.

22 airports to get connected under regional connectivity scheme of AAI. AAI plans to develop over 20 airports in tier II and III cities in next 5 years. Around 55 new airports are required in India by 2030 with an investment of US$ 36-45 billion.


Opportunities Ahead

Government of India is taking all necessary initiatives to promote India’s Infrastructure and Construction Sector. Public Private Partnerships (PPP) in the infrastructure space have increased and are expected to grow even further. National Steel Policy (2017) aims at higher spending on infrastructure and construction through government initiatives. Logistics sector was given the status of infrastructure, to boost investments in the sector. With such strong initiatives of Government of India along with Smart Cities, Housing for All, Bharatmala Project, etc. there exists lot of investment opportunities in Indian real estate and construction sector.

India need to construct 43,000 houses every day until 2022 to achieve the vision of Housing for All by 2022. Hundreds of new cities need to be developed over the next decade. India has the potential to become 3rd largest construction market globally. To achieve these targets, many policy reforms such as the Real Estate Act, GST, REITs, etc. have taken to reduce approval delays to strengthen the real estate and construction sector.

The sector is expected to contribute 15% to the Indian economy by 2030. Huge investment opportunities are available for both Domestic and International private business to work in collaboration with government in the areas such as-

  • Technologies and solutions for the promotion of low cost and affordable housing as well as smart sustainable cities and integrated townships
  • Green/ Energy efficient building material and technology
  • Air and Shipping Ports Construction and Development
  • Highway Construction Projects

Smart City

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