Is the Construction Industry Ready for a Transformation?
Posted On November 10, 2021
Construction is one of the first-ever industries developed by humanity, and thereon, it has continued to shape the lives of millions in unique ways to this day. Every other business relies on the construction industry for its accommodation, plants, and infrastructure. At the same time, it is also a determinant of how people live, interact, work, grow, and play in societies. Not only does it have substantial economic relevance for developed and developing countries around the world, but it also leaves a significant impact on the environment as it is the single largest consumer of the world’s resources. The industry has been slow to adopt the latest technologies developed over the last few decades. Many stakeholders fear experimentation with new techniques instead of relying on old tried and tested methods. However, humans shape their environment, and thereon, the environment shapes them. In the face of market and consumer trends, calls for sustainability and resilience, and evolving regulations regarding the real estate industry, the construction industry is bound for a transformation in the upcoming years. This swift research article by the Iqbal Institute of Policy Studies will discuss the construction industry’s impact on a country’s economy and environment, how rising awareness and trends affect it, and whether the industry is ready for a transformation.
Economic and Environmental Scope of The Construction Industry
The construction industry has great economic and environmental relevance for developed and developing countries alike. With total annual revenues of more than USD 10 trillion and added value of USD 3.6 trillion, the construction industry accounts for 6 per cent of the global GDP. In developed and developing countries, the share of construction in total GDP stands around 5 per cent and 8 per cent, respectively. Also, more than 100 million people are currently employed globally in the construction sector, with residential housing accounting for 38 per cent of global construction volume; transport, energy, water infrastructure for 32 per cent; institutional and commercial buildings for 18 per cent; and industrial sites for 13 per cent. All this underscores the economic importance of the construction industry, and according to a 2014 study by the International Monetary Fund (IMF), if economies invest an extra 1.5 per cent of their GDP towards infrastructure construction, they will achieve a 1.5 per cent growth in GDP after four years (WEF, 2016).
The construction sector is the single largest consumer of raw materials and natural resources globally regarding the industry’s environmental relevance. Almost 50 per cent of the global steel production is used in the construction sector, while 3 billion tonnes of materials are used for manufacturing building materials worldwide (WSA, 2021). However, almost 30 per cent of all solid waste generated worldwide and in Pakistan consists of construction and demolition waste (Osmani, 2019). Due to the lack of solid waste management and recycling facilities, much of this waste is not recycled or reused. This destroys many resources and places-destroys significant a huge toll on the future demand for scarce raw materials. Therefore, there is an excellent opportunity to create closed material loops in a circular economic model. Value can then be generated by improving the quality of construction, materials used and increasing sustainability while reducing costs.
Pakistan is the fifth most populous country globally, with a population of 220 million and a 60 million-strong labour force. Out of the total population, 36 per cent reside in urban areas, whereas 63 per cent live in rural parts. The demand for housing is constantly growing in Pakistan at an annual rate of 2.4 per cent. The construction industry in Pakistan accounts for 2.5 per cent of the total GDP and employs 7.6 per cent of the Pakistani labour force. A variety of factors have contributed to the growth of the construction sector in Pakistan over the last year. After the coronavirus inflicted lockdowns dragged the economies of many countries worldwide, Pakistan announced a construction package for the industry which included benefits in terms of tax and other material incentives. The prime minister’s Naya Pakistan Housing Program initiative contributed alongside, which aims to provide affordable housing to millions of Pakistanis over the years (BOI, 2021).
Changing Trends and the Construction Sector
The construction sector has always remained slow in adopting change due to the difficulty faced by introducing new technologies and methods in the process. However, the construction industry is affected by megatrends shaping the global economy in terms of markets and customers, society and workforce, and politics and regulations. It is generally said that what is not broken should not be fixed. However, older construction methods and practices have often generated large amounts of waste and left a massive and damaging environmental impact. A large number, up to 40 per cent, of resources used during the construction process are often wasted due to negligence of labourers and poor stock management. Technology can play a significant role in reducing these inefficiencies while also improving product use and reuse. Change in consumer demand trends will also impact construction as population and urbanisation continue to grow and bring about new challenges for society.
Market and Consumer Trends
According to a study conducted on global market trends, 65 percent of the next decade’s growth in construction will happen in developing countries. Markets are increasingly becoming globalised, and it is not uncommon to see foreign companies developing infrastructure in local projects. The complexity associated with construction projects is also increasing and diversifying. Subsequently, the challenges associated with ageing infrastructure have also opened new opportunities for the construction sector.
Sustainability and Resilience
In terms of sustainability and resilience, the construction industry remains the largest consumer of global resources, while resource scarcity is becoming a valid concern for many countries. If resources and raw materials are not used efficiently and effectively, the cost of construction will eventually rise and make the provision of essential infrastructure to people a challenging task. Therefore, a significant effort is now being placed to reduce, recycle, and reuse construction and demolition waste. Moreover, due to climate change and its debilitating effects, natural hazards and disasters have increased significantly over the past few years. Therefore, the construction industry is also under pressure to face challenges associated with future buildings’ resilience and infrastructural integrity.
Society and Workforce
Trends related to urbanisation and the growing housing crisis also have a significant impact on the construction sector. More than 200,000 people are daily added into urban areas requiring affordable and healthy housing. The health and comfort need of citizens are also changing as greater life expectancies have also given rise to a higher number of ageing people in cities. This means that future infrastructure and urban planning must cater to the needs and requirements of diverse social and demographic groups in a society. Ageing also uniquely impacts construction as it limits the number of skilled workforces available to developers and contractors. Furthermore, certain infrastructural developments also meet resistance from civil society activists on differing grounds, and stakeholder pressure and organisation will play a massive part in the construction industry’s future.
Politics and Regulation
Lastly, in terms of politicisation and the complexity of regulatory requirements, the construction industry is increasingly facing pressures from government and local regulatory authorities. Developing a typical warehouse in India requires more than 25 different procedures and approvals. Strict labour laws have also been divisive and counterproductive in making the labour workforce more efficient. One critical problem is the amount of time required for licenses in construction projects. Governments and regulatory authorities should fix a time limit on these procedures to ensure that developers and contractors experience no delays at the public and private levels.
The construction industry has great economic and environmental relevance for the world. It accounts for 6 per cent of the global GDP and is the largest global consumer of raw materials, accounting for 25 to 40 per cent of global carbon emissions. Multiple megatrends are shaping the future of the construction industry, which pose challenges and offer opportunities for the industry. The construction industry has always remained slow in adopting change as tried and tested methods favour newer and untested technologies. Given the magnitude of the engineering and construction industry, the slightest improvement in processes can have a far-reaching impact. Future blogs on how the construction industry can transform will dive deeper into how public and private organisations can contribute towards a transformation in the engineering and construction landscape.