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Construction industry feels the pinch
By siliconindia
|
Monday, 05 January 2009, 19:33 IST |
7 Comments
New Delhi: Construction industry in the country is presently going through a tough time as a result of the decline in demand from ITeS, BPOs and tourism segments for residential and commercial properties. Many companies in these segments have reduced the number of acquisition of lands for construction due to global economy slump.
According to a report by Delhi-based think-tank National Council for Applied Economic Research (NCAER), the paucity of demand in ITes, BPO, tourism and trade sectors would adversely affect the demand for residential housing, office space and other commercial space. The report says that the construction activities in these segments will gradually taper off.
The government had announced two stimulus packages on December 7 and January 2 to bailout sectors including construction, which are reeling under the impact of global financial crunch. The bailout plan helped India Infrastructure Finance Company access in tranches an additional Rs 30,000 crore through tax-free bonds apart from the earlier Rs 10,000 crore.
The construction industry currently accounts for seven percent of India's GDP and is the second largest employer in the country. Though the industry sees a decline in demand, lower prices of key inputs like steel and cement turn to be advantageous for construction companies.
The NCAER report further added that though the construction industry faces problems from lower demand, erosion of construction firms' wealth, bank's aversion in lending and drying up of external funding channels, certain positives are there which when combined with proactive government measures, could contribute to the revival of growth in the sector.