Building a house through conventional methods requires significant time and labour and is often affected by weather conditions, with complex coordination leading to delays and cost overruns. Prefabricated construction addresses these challenges by streamlining processes, reducing timelines, and lowering on-site labour requirements. For instance, in 2022, Larsen & Toubro completed a 7-storey DRDO facility in just 45 days, an impressive example of how prefab technology is transforming India’s construction landscape.
With growing demand for housing, infrastructure, and industrial facilities, along with rising cost pressures, prefabricated construction is emerging as a highly attractive choice.
Let us explore the prefabricated industry in detail and assess whether it presents an opportunity for investors.
Current State of the Indian Prefabricated Market
In India, the prefabricated market was valued at about Rs 435–455 billion in FY24 and is projected to grow at around 9.5%–11.5% annually, reaching Rs 715–750 billion by FY29.
India’s prefabricated market is set to grow 9.5-11.5% annually, reaching Rs 715-750 billion by FY29.
Although prefabricated structures currently account for just 1%–2% of the country’s $100 billion real estate market, the technology is advancing quickly, and adoption is rising as projects can be delivered much faster than through conventional methods.
Globally, the prefabricated construction market grew from about $167 billion in 2019 to $178 billion in 2023, showing moderate growth. It is expected to expand more rapidly between 2024 and 2028, at 5%–6% annually, to reach $230–240 billion by 2028. This growth will be driven by greater awareness, demand for sustainable solutions, and rapid urbanisation.
What are Prefabricated Buildings?
Prefabricated buildings are structures made from components manufactured in factories and later assembled at the construction site. These components can include walls, floors, roofs, or even complete modules. Built in controlled environments, they maintain higher quality standards and reduce the risk of delays.
This method is faster than traditional construction and allows flexibility in design. Prefab buildings are widely used in homes, offices, schools, hospitals, shops, warehouses, and factories. They are cost-effective, customisable, and durable, while also being quicker to complete.
Growth Drivers for Prefabricated Industry in India
Rapid Urbanisation: India’s urban population is expected to reach 40% by 2030, up from 18% in the 1960s. This sharp rise is creating urgent demand for housing, healthcare, education, and infrastructure. Prefabricated construction offers a quick and efficient way to meet these needs.
Government Housing and Development Schemes: Initiatives such as the Pradhan Mantri Awas Yojana and Light House Projects promote affordable housing and speed up delivery. Prefab plays a crucial role in achieving these goals through faster assembly and lower costs.
Public Facilities and Social Infrastructure: Prefabricated technology is being used for hospitals, schools, and even modular toilets, such as those built on the Ghats of Ayodhya. These projects showcase how ready-to-assemble kits can significantly cut execution time while ensuring functionality.
Sustainability and Resource Efficiency: Prefab reduces material waste and lowers resource consumption by about 20%. It also enhances thermal efficiency with better insulation and provides earthquake-resistant designs using lightweight steel frames, aligning well with India’s environmental objectives.
Growing Luxury Segment Adoption: Beyond affordable housing, high-end developers are adopting prefab for premium, customisable homes, hotels, and resorts. These projects combine modern design with technology to deliver faster without compromising on quality.
Cost and Time Efficiency: Prefab reduces on-site labour costs and avoids delays caused by weather or material shortages. Factory-controlled processes ensure faster assembly and help companies meet strict deadlines, making it suitable for commercial and infrastructure projects.
Rising Demand in Emerging Sectors: Logistics, cold storage, and healthcare are increasingly adopting prefab solutions. Warehouses and distribution centres for e-commerce, as well as hospitals and cold storage facilities, benefit from scalability, insulation, and speed.
Challenges in the Prefabricated Industry
Low Market Awareness: Many customers and contractors are unaware of prefab’s benefits. Concerns over durability, safety, and limited customisation often make them prefer traditional construction. Cultural preferences for conventional techniques also slow adoption.
Skill Gaps and Labour Shortage: Prefabricated construction requires specialised skills and knowledge of advanced technologies, which remain relatively new in India. Training workers takes time and raises costs, limiting scalability.
Dominance of the Unorganised Sector: A large share of the industry consists of unorganised players competing mainly on price. This puts pressure on organised companies and raises safety concerns when low-quality materials are used.
Supply Chain Limitations: India has only a few reliable suppliers of high-quality raw materials for prefab manufacturing. This increases supplier bargaining power, leaving manufacturers vulnerable to higher costs, delays, and quality risks.
Stocks to Add to Watchlist
What’s Next?
India’s prefabricated construction sector is steadily moving from experimental to mainstream. The modular prefabricated segment, which produces portable cabins, guardrooms, and semi-permanent buildings in factory settings, was valued at around Rs 17 billion in FY24 and is expected to grow to Rs 28–30 billion by FY29 at an annual rate of 10%–12%.
The pre-engineered buildings (PEB) segment, especially for warehouses, sheds, and depots, is also expanding. Depending on design and usage, PEBs can cost 15%–35% less than conventional structures, though in some cases 20%–25% more. The Indian PEB market grew from Rs 130 billion in FY19 to Rs 195 billion in FY24 at about 8% CAGR and is projected to reach Rs 315–330 billion by FY29, growing at 10%–11% annually, supported by industrial and infrastructure investments.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
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