Construction Equipment Financing- Need of Innovation in Tough Market Conditions

Abstract

arbe h Mi hra · The mechanization of the construction activity in recent times makes construction equipment a major part of the construction industry. The construction equipment amounts to 25% of the total cost of the project. Hence,financing decision of the construction equipment plays a vital role in the success and profitability of the project. Construction equipment can be procured by hiring or buying. This decision is influenced by various factors such as type of the project, scale of operations, tax rate, government policies etc. Procuring construction equipment and machinery is a high cost affair for most construction firms. With over 90% of all construction activity executed by smaller players, the activity is widely dispersed. These players, because of the monopolistic nature of construction, and with the government being the largest buyer of these services, face an erratic and unpredictable workload. As such the existing equipment stock itself is highly underutilized. At present it is estimated that the country has an operating stock of construction equipment valued at INR 75,000 crores and dormant stock of INR 110,000 crores. With the increase in the size and complexity of construction, construction equipment has become an indispensable part of every project. Several gigantic projects, which were beyond comprehension in the past have now been designed and are using sophisticated and heavy construction equipment. I