Authored by Paul Wallett, Regional Director for Trimble Middle-East and India Region
After the post-pandemic boom of 2021, many had expected the Indian real estate market to cool off. However, the demand for new homes has remained robust despite the seemingly endless obstacles and pressures the sector had to contend with. In fact, the property market in India grew by 40% in the first nine months of 2022, according to international property consultant Knight Frank India.
Yet, optimism among construction firms has remained relatively subdued on account of mounting concerns over inflationary pressures and rising input material prices. Construction is a hugely competitive and low-margin business, and even a marginal increase in input prices can have a disproportionate impact on a project’s profitability. Further, the growing uncertainty related to labour and material costs has led to contractors finding it increasingly difficult to forecast project costs in the near to mid-term.
In just three years, the cost of raw materials has increased by up to 40%, according to a study by CREDAI. Another report by property consultant Colliers places the average rise in the cost of construction for housing projects at 10-12% over the last year. This is due to a rise in prices of raw materials like cement and steel.
Given that raw materials make up around two-thirds of the overall cost of a building, construction companies around the world are forced to reassess their operations and processes to cut costs and optimise materials use. Digitalisation of workflows and processes is an active consideration for an overwhelming majority of construction companies.
Adopting digital twins in the form of constructible BIM models, using cloud-based collaboration tools and cutting-edge project and inventory management software are all powerful means of enhancing transparency and efficiency at all stages of construction, leading to reduced material and fuel usage.
Our research suggests that firms who have embraced digital and interconnected workflows perform significantly better than those who still rely on manual processes, or standalone and siloed personal productivity solutions, in terms of cost overruns. The benefits accrue on account of significant reduction in material wastage and enhanced man and machine productivity.
Modern construction technologies that enable full and end-to-end digitalisation are now increasingly commonplace in construction. They enable architects, structural engineers and the construction team to collaborate seamlessly using one interconnected system centered around a digital twin – or a constructible 3D model - rather than separate sets of drawings. This minimises construction defects and errors, and thus reduces operational costs.
The spread of digitalisation in the last decade has surely helped large construction companies around the world to have close oversight of project execution and better control over costs. However, until a few years ago, buying and implementing construction technology was expensive and out of budget for most except the largest engineering and construction firms. Recall that construction has historically been a low-margin business and most of these firms have been restrained by the high cost of adopting construction technology, even if they want to embrace digitalisation. Research shows that as much as 91% of construction companies spend less than 5% of their annual turnover on technology.
However, a series of technology-related innovations and market developments in recent years have brought digitalisation within reach of even the smallest of firms. Innovations in chipsets have meant that even basic computers can handle intensive modelling tasks; while the pervasive availability of cheap cloud computing and storage has also enabled the offloading of intensive processing from local computers onto highly powerful computers or servers accessed via the Internet. Further, the continuing fall in smartphone prices along with increased speeds and capabilities has made digital workflows easily accessible and affordable for onsite teams.
On the software side, the growing availability of annual software subscriptions over the outright purchase of a perpetual license has made it possible even for budget-constrained construction firms to purchase and use the most advanced software tools. Leading technology providers like Trimble have actively sought to make digitalisation more affordable and accessible for construction companies by changing their business models from ownership to access, or from expensive shrink-wrapped software to an annual subscription model, so that small construction firms do not have to spend a large amount to buy the software upfront.
The difference is stark for Indian construction firms – rather than having to invest several lakhs of rupees upfront in buying cutting-edge software; they can actually allocate a small monthly budget for an annual subscription and preserve precious capital. Further, software subscriptions also mean that all feature or version upgrades are automatically made available without requiring any extra expenditure, meaning that software-related expenditure remains fully predictable and manageable.
Finally, this model also allows a construction company to start small with digitalisation, with a lower subscription tier that takes care of their most pressing requirements without bogging them down with expensive features and extras that they do not need yet. And when their business or project requirements grow, they can easily move to higher subscription tiers – enabling them to exercise better control over their software investments in sync with their revenues.
Ultimately, the combination of affordable hardware, software and connectivity has finally made construction technology more affordable and accessible, in turn allowing even midsized or small firms to embrace digitalisation as a powerful weapon to combat inflation and ever-rising input costs.
The benefits of digitalisation of course go much beyond cutting down costs; they also include greater productivity and enhanced operational efficiency; allowing firms to complete their projects faster, and thus bid for and execute a higher number of projects successfully than they could ever do before. The net result is a significant improvement of both the top line as well as the bottom line, making the decision to digitalise a no-brainer.
