Infrastructure outlays expected to support workloads through mid-2020
Data from the RICS Construction and Infrastructure Survey indicates that construction activity was broadly driven by infrastructure workloads during Q2 of 2019.
The construction sector in any country plays a significant role in the "nation building" process. Its activities have a direct impact on employment generation, infrastructure creation and socio-economic development. However, there are challenges impacting the sector's performance, both old and new.
From catering to the growing need for "housing for all"; the rising requirement of office and other commercial space; or the development of public infrastructure, there is burgeoning opportunity for the sector. This bodes well, not just for architects, engineers, and construction professionals who will actually be responsible for building the output, but also for other affiliated professionals and ancillary sectors.
However, poor productivity, shrinking profitability, poor contract management, rising labour and material costs, a shortage of skilled resources, underperforming projects, health and safety, environmental impact, consistent adoption and the use of technology, are just some of the wider challenges that the construction sector faces. Not to mention the new rules and regulations that businesses must understand, adopt and comply with.
Given the competitive and highly risky nature of construction activities, there is a growing need to transform relations amongst the industry, clients, contractors, sub-contractors, professionals and the workforce. This premise gains further prominence as construction the world over, particularly in developing countries like India is playing a pivotal role in infrastructure development linking up to the governments' agenda on Housing for All and Smart Cities.
Dynamic change is the order of the day. The key lies in innovation and in unlocking the many impediments which curtail its tremendous potential for shaping a sustainable built environment. In fact, the intent of the Government to take adequate measures to improve the performance of the sector is clearly visible. Several measures have already been enforced to expedite and improve the contract enforcement regime, thereby impacting India's ranking on the ease of doing business Index . In fact, in 2018 the country gained significant ground by rising 23 places and ranking 77th on the Index. But there is a lot more to be done, not only at the contract enforcement stage, but also with respect to dealing with construction related disputes
The key lies in innovation and in unlocking the many impediments which curtail the construction sector's tremendous potential for shaping a sustainable built environment.
Construction has historically been saddled with adversarial relationships and an imbalanced distribution of risk. To acquire greater value improvement, the process of construction must be re-engineered, more so for India. This will require a cultural shift in the industry, away from adversarial relationships to more collaborative relationships.
A re-engineering philosophy has evolved over a period which does not require the 'wheel to be reinvented', as it draws on the experiences of the manufacturing and production sectors. The objective is to progressively develop integrated project delivery mechanisms which focus on optimizing process predictability and enhancing value.
In India other factors are also crucial to the success of industry development and infrastructure delivery. Comprehensive transformation of all aspects of public service is required to meet new development challenges. This is characterised by the paradigm shift in the public sector which is fostering the creation of private-public partnerships in infrastructure delivery. The need to nurture and champion such partnerships is critical to meeting the demands of development on one hand and the imperatives of reconstruction, growth and development of the industry on the other, and this is possible with some formal regulation guiding these tenets.
Construction and infrastructure sectors change rapidly and the regulations that define its boundaries are constantly shifting. The sector has seen a fair spate of reform and regulations come into the market over the course of the last few years, which is likely to continue over the next few years as well. But not all regulation that has come in has made the necessary impact it was supposed to.
Not just in India, but the world over - enforcement of regulation has been a challenge, as human tendency is to resist change. But regulation is a "necessary evil", as its intent is to streamline and improve transparency, increase compliance with standards in order to bring confidence and trust to the market for the benefit of investors and customers alike.
But for regulation and reform to make an impact, it needs to have adequate teeth. RERA while widely considered as being a real-estate focused reform has its actual manifestation in construction activity. From monitoring construction progress to ensuring funds are retained for specific project use, it covers specific construction linked progress and checks and balances. But unfortunately, the regulation hasn't made the desired impact as envisaged.
So, what is it that needs to be done to ensure that a single regulatory body (RERA?) becomes an all-encompassing regulation that also caters to the shortcomings of the construction sector? A unified regulatory mechanism can ensure that the entire built environment sector (real estate, construction and infrastructure) functions under unified guidelines and pave the way for process efficiency, transparency, standardised practice, professionalism and reduced costs. At the same time, it's important not to over-regulate and limit the sectors performance. There must be a healthy balance in the way policy and reform agendas are implemented to drive sector growth.
Several issues exist even today, despite all the progress the sector has made, in relation to sourcing skilled manpower. Industry led education, training institutes and up-to-date course curriculum which cater specifically to the construction sector are few and far between. Add to this the lack of qualified professionals practicing in the sector. Given the capacity constraints and hurdles to acquire and retain existing talent, stakeholders need to reassess their roles and responsibilities to overcome deficiencies existing in the system.
This takes huge precedence when we see the requirement of 15 million construction operatives by 2022, in comparison to the available certified trained manpower of only 100,000 between 2016–19 as per the Pradhan Mantri Kaushal Vikas Yojana (PMKVY). The question that remains unanswered is despite the intent and the investments made by the Government, why is it not resulting in demand generation for employability in the sector.
With an improved economic outlook for 2020, infrastructure development is only expected to pick up pace going forward with a direct bearing on construction activity. This along with increased global competition and customers' demand of world class quality and amenities, there is a genuine and urgent need to enhance and strengthen capabilities, project management skills, and execution timelines. Only if the sector is able to adapt to change and cater to demand, will it live up to the expectations of stakeholders and achieve infrastructural goals. Therefore, re-engineering of existing processes and reforms will pave the road ahead.
The industry has already made huge strides in embracing certain reforms, technological changes and modern practices that lead to lean construction and cost optimisation — the test now is for these changes to gather momentum and redefine the tenets of the market.
Nimish Gupta FRICS
Managing Director, South Asia
With over 22 years' experience in real estate, construction, education training and technology adoption, Nimish built up a career within the built environment sector after graduating as an engineer from the National Institute of Technology. He started work at Larsen & Toubro, the largest construction company in India, and has since held senior positions within high-profile real estate and construction organisations, such as Vipul Modern, a leading construction services provider, Laing O'Rourke, and Lendlease.
Nimish is a chartered surveyor himself and has been closely associated with RICS since 2005. He played an integral role in the formation of the vision, planning and implementation of RICS South Asia, and was among the first to qualify as an RICS Fellow in India.