Future of Construction Equipment Rental Business
Infrastructure development is one of the key areas for economic development. Hence, it always remains as the focus area for any government. It heavily contributes to the GDP and helps create growth opportunities for industries like automobile, manufacturing, export, steel, skill development and many more. In India construction is the second largest sector after agriculture which contributes 7-8 per cent towards the national GDP. Infrastructure industry is one of the largest employment generators, currently employing about 33 million people. It is one of main reasons why the central government is planning to invest $1 trillion in infrastructure development during 12th year plan (2012-2017).
Construction project cannot function with just planning: it needs limbs the complete project. Construction equipment is an integral for every Infrastructure project and that is the main reason for which the industry which grows twice as fast. The construction equipment market is expected to grow by 12% CAGR to $4 billion by 2017.
Construction equipment is divided into four major groups;
1. Earth-moving Equipment: - Earth moving equipment the equipment includes backhoe loaders, wheel loaders, steer loaders and tippers. All these equipment holds large share in this segment and accounts up to about 70 per cent.
2. Material Handling Equipment: - Materials handling comprises of tower cranes, bulk material handling, mobile & hydra cranes.
3. Road building equipment: - Road building equipment includes scrappers, excavators and bulldozers.
4. Concrete Equipment: - The concrete equipment includes transit mixer, batching plant, concrete pumps and aggregate crushers.
Equipment Rental Business – A Booming Opportunity in India
About $2.3 Billion construction equipment is sold in India, nearly 7% of equipment is sold to rental companies. Most of the rental companies which dominate the market are regional players. The rental business is quite organized and is expected to grow year on year in days to come in India.
Few interesting developments are now big contractors have started setting up their own equipment rental distribution. Surplus equipment is adding positive indices in growth of rental business. Earlier equipment on rent were used only for intricate projects like wind energy, thermal power, port construction mega industrial projects etc. Now even for smaller projects heavy lifting cranes are required on rent, basic equipment like backhoe, cranes pick-n-carry are also required on rent. There has been an upward trend in leasing out concrete equipment, excavator, tower cranes and other construction equipment.
Benefits of Rental Business
Contractors who hire equipment from rental companies are always in profit as they do not invest in purchasing new asset. The requirement of the equipment for short or long duration is without any capital expenditure which in few cases it can rise up to $3M. The maintenance of Fleet and stocking of spares is also saved by going to rental companies. The complete expenditure on hiring of any equipment for any duration is treated as revenue expenditure of 100% and is allowed by the Income tax department as service tax amount paid to be adjusted.