As the slump in demand and capital squeeze give place to buoyant outlook and realistic growth prospects, the Indian construction industry looks set to tower over the rest.

It has been two years since Donald Trump Jr., son of legendary real estate developer Donald J Trump and Executive Vice-President, Development and Acquisitions, The Trump Organization, US, attended `Cityscape India 2007,' one of the largest and well attended business-to-business real estate events, held in Mumbai in November 2007. It was then Trump spoke how India's booming economy had fueled the demand for more residential development, especially luxury housing, hotels and resorts, and indicated his desire to enter India's real estate sector. "We feel it is now time to invest in Indian realty projects as the quality has moved up and we see emergence of some high-end developers with a product level that will support our brand," said Trump in his speech at the event. And when Trump followed it up with the announcement, in July 2008, that he was launching a $1 bn Indian hedge fund to focus on luxury real estate investment, it further served to underscore the promise and potential that the Indian real estate sector offered.

The construction industry, which comprises different segments like housing, real estate, commercial, industrial, infrastructure, etc., witnessed a boom phase, with growth as high as 16.2%, in 2005-06, but started slowing down thereafter due to the increase in the costs of construction, following the steep rise in the prices of inputs like steel and cement and also the mounting interest costs, reveals the Economic Survey for 2008-09. While the limited supply of urban land for a few segments of the industry saw an excessive price buildup in the form of speculative bubble, the rise in interest rates and the deceleration in housing loans led to a drop in demand. Rising costs, falling demands, and dearth of liquidity in mid-September 2008 resulted in a sharp downturn in the sector. The trend continued throughout the remaining months of the year, with demand moderating and costs remaining high. However, the FDI inflow came as a beacon of hope, with the construction sector (including housing and real estate) attracting Rs 21,413.1 cr in 2008-09, a 74% increase over the previous year's figures.

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