¨Rome wasn´t built in a day¨- so goes the saying. But a soaring 57-storey skyscraper in Changsa- located in the Hunan Province of South-Central China- has the marvellous feat of being accomplished within a minuscule span of 15 days ascribed to it, courtesy the modern metal building technology employed in its fabrication. Prefab and pre-engineered building (PEB) sectors have been breaking new grounds in the construction industry. PEBs, in particular, are slated to create new waves by making inroads into a gamut of sectors as the preferred alternative.
Transpiring from its once lurking domain in concrete columns, steel has evolved as a predominant element in the construction arena. Consequently, pre-engineered structures have blossomed from a nascent stage to assume a key position in the metal building industry. The concept gained impetus in the Indian market in 1999-2000 and with the proliferation in the demand for steel as the primary raw material for construction, the PEB sector has carved a niche in the ever-ramifying construction industry. Though the sector was hit by the global economic meltdown in 2008 and has witnessed ebbs and tides ever since, it has sustained the slump- post the buoyancy in 2010-11- and is foreseeing an optimistic revival this fiscal year.
The humongous expanse of the construction industry has been accommodating technological innovations galore, and PEB as a sector has crept in slowly but steadily as one of the most viable building options that makes optimum use of steel and expedites the construction process by miraculous degrees. Post designing, PEBs are fabricated off-site and shipped in CKD (Completely Knocked Down) condition to the site, where all the several components are assembled and bolted as per specifications, saving 30-40 per cent of the project time.
¨Traditionally, each three metre lift for a floor requires 28 days of clearing time, so it takes two months to lift a floor (two lifts per floor). In case of PEB, each lift is of 12 m. In India, a 30-storey (100 ft high) building takes approximately three years to complete, whereas a PEB takes only six to nine months,¨ states Alakesh Roy, Managing Director, Zamil Steel India. Industry experts opine that PEBs are economical and offer cost savings to the tune of 30 per cent in construction, eight per cent in freight, and 15 per cent in energy.
Besides its many inherent advantages; in terms of speed, economy, strength, and aesthetics; the spurt in the infrastructure sector, the growing emphasis on green building construction, and the gradually evolving investor sentiment have contributed in making PEB a name to reckon with. D Raju, Managing Director, Kirby Building Systems India Pvt Ltd- the leading player in the Indian PEB market, points out, ¨Changes in government regulations, industry friendly policies, promotion of India as preferred FDI destination, rising disposable incomes, and increasing demand for various products and services, resulting in heavy FDI inflows further boosted the PEB technology.¨
According to Alakesh Roy, ¨The total PEB market is around 500,000 tonne. Steel accounts for 30 per cent of the total construction industry and PEB forms 10 per cent of the total construction in steel.¨
PEBs have made forays into an array of segments, viz., factories, warehouses, cold storages, showrooms, supermarkets, low height commercial complexes, industrial sheds, workshops, stadiums, bridges, fuel stations, aircraft hangars, exhibition centres, railway stations, and metro applications.
¨The industry is moving from pre-engineered buildings such as warehouses, and offices to highly complex pre-engineered sections in infrastructure such as power plants, steel plants, ports, oil & gas utilities and so on, which require very specialised design skill sets,¨ asserts Raju.
However, PEB penetration in the residential sector is relatively low as it is not considered a viable option, especially for high-rise buildings. ¨Over the last few years, PEBs have found favour in industrial and warehousing applications. The growth here is in the range of 10-15 per cent per annum, and is expected to increase going forward. But it remains limited in residential and real estate applications,¨ avers Rohit Ranjan, General Manager- Marketing (Building Solutions), Tata BlueScope Steel Ltd.
Despite making several breakthroughs and denting the conventional concrete construction market to an extent, PEB as a sector is yet to attain holistic growth. The sheer magnitude of the construction industry is believed to be a constraint in this regard. Nevertheless, there are no two views regarding the sector´s immense potential for growth.
Ranjan reveals, ¨While the construction market in India is estimated at around Rs 250,000 crore, the PEB market is estimated at a little over Rs 5,000 crore. This is a reflection of the relatively low level of PEB penetration in construction. However, this is also encouraging for the PEB industry, which is expected to continue growing faster than the overall construction market.¨
Overall, there is a huge potential for PEB in India owing to the robust economic growth, increased government spending on infrastructure, and gradual change in mind set with regard to the usage of PEB in construction. The new potential application areas for PEB in the next few years will include more and more power plant structures like the Madhucon Projects Ltd (refer to case study 1), steel plants, ports, oil & gas utilities, bridge girders, etc., apart from factory buildings, commercial buildings, warehouses, cold storages, distribution centres like the Hindustan Unilever Ltd´s Distribution Centre (refer to case study 2), airport terminal buildings and so on.
¨The demand for PEB would skyrocket if the Prime Minister´s call for ´Make in India´ gains traction. We expect growth in cold chain infrastructure and connected sectors like food processing and post harvest management of agricultural and horticultural produce. PEB is a major pivot around which these activities would revolve,¨ affirms Srinivas. While admitting that PEB as an industry is yet to flourish, experts testify its growth potential.
¨There are growth sectors in India which we are targeting. Chocolate industry is growing by 20 per cent and animal feed industry by 20-30 per cent. A major breakthrough is likely for PEB in the form of bottling plants and e-commerce firms. With e-tailers like flipkart attempting delivery in three hours, they require spaces within every 50-100 km,¨ asserts Roy.
The sector is likely to see buoyancy in the years to come on account of the growth in the warehousing sector, the government´s announcement of the 100 smart cities, and the swift progress in the metro rail projects. ¨The potential of PEB structure is quite high in India. As construction process of 100 smart cities commences, faster construction is likely to be the thrust area,¨ says Banerjee.
Besides brisker pace of construction and curtailing of costs incurred, PEBs offer an assurance of factory-built quality and uniformity in design and fabrication. PEB buildings can be dismantled and relocated easily. Future extensions and expansion as well as modifications can be easily accommodated, without much hassle. Steel being highly durable, the life-cycle cost of pre-engineered steel buildings is significantly lowered and these are also easier to maintain. Corrosion and physical damage are the foremost concerns when it comes to steel usage. Periodic inspection, timely repair, and simply keeping surfaces clean enhance the life of steel buildings.
¨Apart from recycled steel; leak-proof roofing, usage of skylights, and the use of insulated and reflective roof & wall systems that reduce heat transfer and provide better thermal insulation; assist in reducing energy consumption and thereby, offer a complete solution for green buildings,¨ claims Amol Kotwal, Director Energy & Environment Practice, Frost & Sullivan.
PEB structures aid in reducing the carbon footprint of a company due to reduced greenhouse gas emissions. ¨The high recycled content as well as the energy efficient methods for producing steel lead to reduced Green House Gas (GHG) emissions,¨ adds Kotwal.
Since no welding at site is required, site activity is greatly cut down. While offering better sustainability, its superior strength-to-weight ratio economises on the quantum of material used. ¨It involves totally dry construction at site, with negligible use of construction water. Featuring ready-made components, it eliminates need for shuttering and scaffolding. It also affords speedier ROI of capital to the user,¨ affirms Narasimhamurti Srinivas, Mentor, Lloyd Insulations (India) Ltd. In the wake of rampant earthquakes like the recent Nepal earthquake, earthquake resistance is increasingly being regarded as a significant parameter during construction. Roy highlights, ¨In India PEBs are built to sustain an earthquake of magnitude 7 on the richter scale. However, if greater safety is sought, the PEBs can be tailor-made according to requirements.¨
¨One of the main challenges faced by the PEB industry in India is acceptance among the Indian corporates. But in the last decade, there has been an increased acceptance of PEB due to rapidly expanding industrialisation and increasing demand for faster project completion. Some of the other challenges faced by the PEB industry include price volatility of raw materials mainly steel, availability of skilled manpower, etc.,¨ reveals Raju.
Fluctuating prices of steel, which constitutes almost 65-70 per cent of the PEB cost, and falling iron-ore prices are creating an adverse impact on investments. TV Narendran, Managing Director, Tata Steel India, points out, ¨India has turned into a net importer in FY´15 with a significant surge in imports from China, Russia, Japan & Korea. All this has led to a sharp drop in the steel prices in India. The prices dropped by over Rs 3,000 per tonne in the last quarter.¨
PEB is a rather unorganised sector and the absence of any national governing body and the consequent lack of standards and codes are touted by many as major constraints. Nonetheless, the leading players maintain that they do have a forum in the form of the PEB Manufacturers´ Association and are organised to that extent. ¨PEB industry is not confined because of the absence of any national governing body as the industry has already formed an association consisting of all leading PEB players,¨ exclaims Raju.
Organisations like INSDAG-Institute for Steel Development and Growth, promoted by the Ministry of Steel- have come to their rescue. Sushim Banerjee, Director General, INSDAG states, ¨INSDAG has published a ´Design Guidebook for Pre-Engineered Buildings´ for the benefit of the users. It is funding the revision of IS: 801 (Code of Practice for usages of cold formed structures). INSDAG has also proposed to prepare the draft PEB manual in line with MBMA, USA.¨
PEB players affirm that they follow national and international standards, namely, MBMA, AISC, and IS. Srinivas asserts, ¨Steel buildings are designed using the IS: 800 Code of Practice, which adequately covers earthquake withstanding capability of the assembled building in a well-drafted section.¨
Government, through its measures of infrastructure investment, has a crucial role to play in the growth of PEB in India. The infrastructure expansion programme will contribute towards catalysing the construction activity, thereby driving PEB growth. Few of the reforms that the industry seeks would be:
The PEB players claim that so far the role of the government in this sector has been negligible. ¨Disparities in local taxes between states and predatory incentives offered by certain states have distorted the pattern of movement in this industry,¨ objects Srinivas. He however, expresses hope, ¨We expect introduction of GST to remove many such anomalies. It is yet not clear though, how tax and duty exemptions would be factored in after the introduction of GST.¨
Roy seconds, ¨The central government has not extended any benefits yet. Central level excise duty is standardised for all raw materials; so certain states benefit, while others are at a disadvantage. This will be eliminated with GST, giving a boost to the industry. At the state level, Uttarakhand government has made a special category for PEB at the lowest tax rate, giving impetus to the sector. Prior to this, PEB as a concept was never categorised.¨
These reforms and many other such initiatives in the coming future, as promised by the government, is expected to make the Indian construction and infrastructure segments stronger, and is slated to increase its percentage share in the overall GDP contribution; thereby, giving a positive growth momentum to the PEB industry in the forthcoming years. SEZ tax benefits and excise holiday zones are measures which would encourage more investment in this sector.
Case Study 1
Case Study 2
¨Indian construction industry poised for a big PEB wave¨
- D Raju, Managing Director, Kirby Building Systems India Pvt Ltd
Would you like to highlight the kind of projects undertaken and accomplished by Kirby Building Systems India Pvt. Ltd? What are the projects that are underway? Do these include any international projects? Could you provide an insight into the size of these projects?
Today, at 200,000 MT capacity per annum, Kirby India is the market leader in the Indian PEB market with construction of more than 16,000 buildings spread over an area of 25 million sq m. Kirby India has been catering to different applications spanning all the industry verticals.
Dr Reddy´s, JSW Steel, Meenakshi Energy, Apollo Tyres, Trident Ltd, Juhi Industries, Skipper Electricals, POSCO India, ITC Ltd, L&T, etc., are some of the clients for whom projects are under execution. Apart from these, there are many other projects that are in various stages of project cycle across India. All these projects are of various sizes, from 1,000 sq m to over 100,000 sq m.
In the Indian PEB sector, what is Kirby´s current market share?
Kirby India has more than 30 per cent market share and continues to lead the Indian PEB market despite entry of more than 30 players in the industry over the last eight years. There are two facilities at Hyderabad and Haridwar, with each of them having 100,000 MT annual capacity.
What is the penetration level of PEBs in the Indian market, in terms of the prominent sectors that they cater to? Is it slack in the residential sector?
The industry has moved from basic applications such as warehouses, petrol stations, factories, workshops, etc., constructed in early three-four years of the last decade to highly complex buildings such as shipyards, complex factory buildings, offices, etc., in the last seven-eight years to power plants, steel plants, and high rise structures - commercial and residential - more recently. However, steel as a construction material for high rises is being accepted at a very slow pace by customers as the building segment is still dominated by concrete.
So far, what has been the role of the government in the growth of PEBs? Is there any government regulation or reform that is sought by the sector?
The government should promote steel as one of the preferred construction material for speedy implementation of the projects. Concessions in the form of tax incentives should be extended for steel construction industry to meet all the shortfalls of the country´s infrastructure and the targets set by the government.
If we are to assess the prospects of the sector, is it likely to see buoyancy in the years to come?
It´s not surprising that the Indian construction industry is eminently poised for a big PEB wave, given India´s renewed focus on infrastructure and the new industrial thrust, including housing for all by 2022. The government is planning to build six crore houses - four crore in rural areas and two crore in urban areas to commemorate 75 years of India´s independence.
Central government´s ´Make in India´ campaign and the recent approval of the ordinance for amendment of Land Acquisition Act for development of infrastructure and industry related projects will further give a boost to the economic growth as this was one of the major hurdles in delay of implementation of many projects. Another plan of the government is implementation of 100 smart cities, and this can also be efficiently achieved by using high rise steel structures as done in developed countries, thereby providing an affordable and sustainable material for construction.
¨The profitability of the sector is around 5-10 per cent¨
- Alakesh Roy, Managing Director, Zamil Steel India
Could you throw some light on the kind of projects that have been accomplished by Zamil Steel India? What are the projects that are underway? Would you like to highlight the size of these projects?
In FY2010-11, Zamil Steel had two 1000 tonne projects, viz., Akzo Noble India Ltd Project and Bridgestone Tyres Project. Now, at any given point of time, we have at least 10 projects which are over 1000 tonne and 3 projects which are over 3000 tonne, i.e., Rs 30 crore. Two projects of national and international eminence are the Boeing Hangar in Delhi for the Indian Air Force- C17 aircraft and the Mars Chocolate Factory Project at Khed in Maharashtra. A year ago, Zamil Steel undertook the Medreich Project- the second pharmaceutical firm preferring PEB in Karnataka. Paper plants like JK Papers, Emami Papers, etc., are some of the other big projects accomplished by Zamil Steel. Recently, two expansion projects for Mahindra, introducing two new concept cars in India, have also come our way.
How well is Zamil Steel India placed in terms of profitability?
Profitability is always relative. There are lot of factors involved. Currently, the profitability of the sector is around 5-10 per cent, which is a drop from the earlier 15 per cent. But there is hope for recovery. Earlier it was a cost plus model, now it is a price minus model. It is important to find avenues to cut cost and ensure efficient delivery. We are thereby, required to work reverse and squeeze out the margins.
Apart from the PEB Manufacturers´ Association, the sector is rather unorganised. Would it be right to say that in the absence of a governing body, the standards and codes of construction are often not adhered to?
There is a PEB Manufacturers´ Association but it is more of a forum for us to meet. However, to my mind, since the sector offers customised solutions, the presence or absence of a governing body is not a criterion as such. Also, with natural calamities like earthquakes and cyclones becoming rampant, code stringency has improved. Stability certificates are now demanded. MBMA, AISC or IS codes are being followed by the sector. Under Indian Standards, the most commonly followed code is IS:800-2007 that is due for revision. With respect to seismic zones and winds, the guidelines by the National Building Corporation are adhered to.
Is the PEB sector likely to be boosted by the growth in the warehousing sector, the government´s announcement of the 100 smart cities, and the swift progress in the metro rail projects?
No major growth is likely in the current fiscal. Post GST, warehousing will become a major factor but now it is in gestation stage. Smart cities- a seed yet to be sown- will bring significant growth only if it is a greenfield smart city like New Raipur and Chandigarh.
As far as metro rail is concerned, in terms of steel consumption, PEB will see boom but not a sustainable growth over a long period of time.
I am looking forward to Mr Modi´s ´Make in India´ campaign. It is manufacturing growth which will create room for expansion of capacities, and addition of new capacities- factories, industrial warehouses, sheds, and other such avenues. That is where the real growth will come.