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COVER STORY

about 5.1 % during the forecast period (2020 – 2025). India General Manager in India, Samir Bansal, the growth in rental
has nearly 1,263 construction projects in progress across has been driven by contractors not wanting to own equipment
various sectors, such as power, road, railways, telecom, and themselves, combined with changes in the qualification process
shipping. Additionally, the growing demand for office space for government contracts in India.
in tier I and II cities will continue to increase the demand for “Rental accounted for less than 50% of the market in 2010. At that
rental construction equipment in the country. The equipment time, a lot of contractors had to own equipment to be eligible
rental industry contributes to India’s infrastructure development for government contracts. However, government requirements
with rental companies serving the construction companies in have now changed, and contractors only need to have access
the completion of projects by providing high-tech machines to equipment. They don’t have to show ownership. Contractors
and skilled manpower. However, the Equipment Rental Industry have been happy about that – they don’t have to invest in the
needs to become organized by following standardization, equipment or maintain it,” he said. “To be clear,” he added.
adopting best global practices, and building relationships with “These are genuine rental companies. They own equipment but
all the stakeholders. In India also, the equipment rental industry they do not undertake construction work themselves. They are
is gradually coming on track, but continues to remain under not to be confused with contractors who might rent out spare, or
pressure, as the delayed payment recoveries and stagnant rental under-utilised machines to their peers.”
rates remain major concerns. Equipment has become expensive But as big as the rental segment is in India, there are virtually no
and owing to the devastating economic impact of the Covid major chains or national networks. It is an extremely localized
pandemic, the operating costs of a rental company have also activity, “Despite rental being so big, it is very fragmented,” said
significantly increased. Bansal. “It is all small private companies. The only exception
Many might be surprised to know that rental represents by far the is in the bigger mobile cranes, where there are large rental
biggest channel for equipment sales in India. But it is rental on a companies.”
highly localised level. Two thirds of construction equipment sales The structure of the Indian market is an unusual one. Demand
in India are to rental companies, according to new data from for backhoe loaders is huge, more than 37,000 units in 2021,
Off-Highway Research. This puts rental penetration above that or some 55% of the Indian market. At times in the past sales
of many mature markets. It is also striking that rental penetration of backhoe loaders in India have been greater than the rest
has seen considerable growth in India over the last decade. The of the world combined. More than three quarters of backhoe
proportion of machines sold to this channel has risen from 47% loaders in India are believed to be sold to rental companies,
in 2010 to 67% in 2020 and 2021. Last year, that equated to and rental is a similarly dominant channel for another high-
more than 45,000 machines sold to rental out of a total market volume product, crawler excavators. In value terms, Off-Highway
of just under 68,000 units. According to Off-Highway Research’s Research estimates that the retail value of the Indian construction

24 CONSTRUCTION OPPORTUNITIES|JANUARY 2023