Projects worth Rs 9 lakh crore in the construction sector in India were stalled as on June 30 due to weak macro-economic environment and prolonged delays in getting clearances and land acquisition, ICRA said in a report.
“The Indian construction sector over the last few years had faced challenges arising from weak investment cycle and delays or uncertainties in policies leading to weak order inflows as well as slowdown in execution. As of June 30, projects involving investments of Rs 9 lakh crore were stalled,” the rating agency said.
Commissioning of projects also witnessed a decline from Rs 3.6 lakh crore in FY13 to Rs 2.2 lakh crore in FY14. Similarly, new project announcements declined by 17 per cent in FY14 led by sharp contraction in private sector projects owing to subdued business confidence and inordinate delays in getting approvals.
Delays increased the uncertainty on the projects’ viability and also reduced the risk appetite of developers.
ICRA said besides held-up projects, there are sizable projects which are slow moving or facing some implementation issues including prolonged delays in getting clearances, as well as difficulty in land acquisition.
“There have been several sector-specific concerns which have impacted investments in new projects as well as implementation of on-going projects,” ICRA Senior Vice-President Rohit Inamdar said.
According to ICRA, the power sector accounts for an major share of stalled projects, even though the government has taken several policy actions in the past couple of years.
“The sector has been facing difficulties in getting coal and gas as well as long term power purchase arrangements amid poor financial health of state utilities. Additionally evacuation, transmission and logistic bottlenecks have also dampened new investment environment,” he said.