For the next two years, at least the construction equipment rental companies will have to work both in an environment of uncertainty as well as promise of strong market. Satin Sachdeva, Founder and Secretary General, Construction Equipment Rental Association (CERA), and Managing Director and CEO, Equipment Planet, elaborates.
Which equipment segments drive demand for rental market in India?
Major equipment that will drive the construction equipment rental industry are piling rigs, concrete equipment (transit mixers, boom placers and batching plants). In road equipment sector, loaders, motor graders, compaction rollers and pavers (sensors and slipform) will be in demand.
What are the positive trends in the current rental market for construction equipment?
After Construction Equipment Rental Association (CERA) has come into being, the positive trend for construction equipment rental industry is its gradual transformation into organised sector from an unorganised one. The current rental market is moving towards standardisation - of practices and rules, guidelines, operating procedures, business rules and practices, rental tariffs, salaries of operators, warehouse sharing prices and many other indicators. The industry is also taking up the responsibilities of training its manpower and become a centre for skill development and training of operators and technical staff. The global construction industry is expected to witness significant growth in the coming years in infrastructure, residential, and non-residential sectors.
What is your experience on rentals in the last two years?
The CE rental industry is facing many challenges. Due to the issues of GST input, the construction companies are themselves buying construction equipment. Consequently, the hirers have been hit quite badly. We are already trying to resolve the issue by talking to construction companies. Hopefully, we will find the mutually beneficial solution soon.
Secondly, the unceasingly delayed and stuck payments, and lack of standardised practices in the construction equipment rental industry are becoming detrimental to the industry.
There is a need of new models of hiring which give more option to construction companies and are beneficial to both hirers and construction companies. Currently, two types of rental models exist - dry and wet rentals. Dry rental is not much prevalent in India unlike in western countries. Dry rental gives the control of equipment in the hands of lessee and it has been observed that the equipment is not used and maintained in a standard way and consequently it cuts short the life span of the equipment. However, the wet rental is highly prevalent in India as it keeps the equipment in control of the rental company in terms of operators and its maintenance.
How importannt is rentals in the current market scenario?
CE rental companies are the backbone of India's infrastructure development. Without a rental company, an infrastructure project cannot gain momentum. Hirers actually economise the costs of projects which would otherwise be tremendously high if the construction companies have to purchase their own equipment and machinery.
What is the outlook of the CE rental market?
Market reports say the global CE rental market size is expected to reach $ 230 billion by 2025 at a 4.8 per cent CAGR during the forecast period. But in India, issues of unceasingly delayed and stuck payments, lack of standardised practices in the construction equipment rental industry and fall of giants like IL&FS, ERA Infra Engineering, etc, and the Hybrid Annuity Model (HAM) of the government have created a gloomy scenario. Though India will be among top countries for infrastructure development and construction, for the next two years, at least the construction equipment rental companies will have to work both in an environment of uncertainty as well as promise of strong market. The major challenge before the government will be to put all the infrastructure projects back on track.