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The fact that the plumbing industry in India is attracting new players and also the existing manufacturers are going for capacity expansion clearly gives us the clue as to the future prospects of the industry. “This is a market which is growing at a very steep rate and the external survey that we did by one of the big four revealed that this market today is Rs. 8,500 crores which will grow to Rs. 16,000 crores in the next 5 years. So, there is enough room for anyone who is trying to setup provided they have (a) the right brand (b) the right product (c) the right marketing sales network,” said Dhirup Choudhary, Managing Director & CEO, HIL Ltd, one of the recent entrants into the plumbing pipes manufacturing segment.
One of the reasons for their optimism is the regulatory reforms carried out by the government in recent months, like introduction of GST and subsequently, the e-way bill system and also Real Estate Regulatory Authority (RERA) Act for real estate sector.
RERA, for example, will ensure that only serious and quality conscious builders will remain in business. These builders will have to guarantee quality due to which they will always go for branded quality products. As plumbing plays a critical role in a building they will always go for products which have certification and quality and who offer warranties. This will ensure substantial shift in business from unorganised to organised sector. However, unorganised sector may still play a substantial role in agriculture sector as the competition is very intense there and price is a major influencer in decision making. Also, local manufacturers are preferred there over branded products. That may be the reason, most of the capacity expansion is happening in plumbing pipes segment.
Earlier, entry tax (including Octroi) charged by many states and Municipal Corporation had encouraged production close to the place of consumption. However, with the introduction of GST the scenario has changed and location of manufacturing is no more relevant as long as logistic costs are within economically feasible limits.
Construction expenditure in urban infrastructure is expected to be approximately Rs 3.6 trillion between 2017-18 and 2021-22, which is twice the expenditure of the previous five fiscal years. Nearly 60% of this expenditure is towards water supply and sanitation. Further, under Smart City Mission, impetus is also given to supply, sanitation, affordable housing, etc.
Though real estate sector is presently passing through sluggish demand, situation cannot remain so forever. The demand is expected to pick up sooner than later due to various compelling reasons like population explosion, increased income level, faster urbanisation, easy availability of finance and growing rural income. Further, government’s housing for all program involves construction of 12 million houses by 2022.
Thus, demand for plumbing and pipes can move only in one direction, that is northwards. No wonder then many new players are announcing their plans to enter this virtually a virgin field.
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