03 Sep 12 Residential construction industry to drive the waste water treatment business in the country
Driven by the economic growth, rapid urbanization and the exploding population, India is now one of the biggest players in the global residential construction industry. Also, one of the biggest concerns this year has been the deficient monsoon owing to the El Nino weather pattern which has affected the movement of monsoon winds along the Indian ocean. With these developments and deficient monsoons in the country, water management has become a key concern for municipalities and environmentalists. Hence, with authorities turning up with regulations regarding the waste water treatment plants (WWTP) in the residential area, I expect the waste water treatment market to expand with the residential construction industry.
Current state of the residential construction industry
According to the National Skill Development Center (NSDC), the residential construction business in India grew by 12% CAGR in the last eight years making it one of the fastest growing industries in the country. The eleventh five year plan further estimated the demand for houses to increase by 4.8 million per year during the plan period.
Current state of water and waste water treatment in India
Currently, the market size of the Indian water and waste water treatment is $4 billion. If we look at the water treatment business in India, waste water treatment accounts for only 60% of the water treatment business and the residential sector accounts for 3% of waste water treatment. Furthermore, only 21% of the total sewage that is generated by all the class I cities and class II cities is recycled. The gap between waste water generated and current installed treatment capacity is as high as 23000 million liters per day. With only a few state governments making WWTP mandatory there exists an extremely lucrative opportunity for the waste water treatment industry.
Regulations for the WWTPs
To tackle the water problems in the country, the state pollution control boards have come up with regulations making it mandatory for residential areas with a built-up area of more than 20,000 square feet to have a WWTP. These rules, however, differ from state to state as these matters are decided by the respective states. Karnataka State Pollution Control Board, for example, made it mandatory for a WWTP to be established in residential complexes having more than 50 flats or generating more than 50m3 of sewage in a day. This water is to be directed towards toilet flushing, car washing, irrigation etc. Owing to these regulations, ValueNotes estimates the markets for waste water treatment in the country is expected grow by 10 to 12% every year.
Opportunities mushrooming in the WWTP market
- Till date 85% of the cities in the country still lack the waste water treatment plants. With such regulations in place alongside the expanding residential construction industry, there exists tremendous business opportunities in the Indian WWTP segment
- Also since the current market for WWTP is highly fragmented and unorganized, several new players can venture into the WWTP market
- Till date only municipalities and 15 large players dominated this market. As, WWTPs in the residential sector will be of smaller size and cost compared to the ones in the commercial and industrial segment, I believe there is plenty of opportunity for smaller players to enter the market
- Besides, the government plans to open up private investment in different fields including waste water treatment which might boost the private investment as currently more than 50% of the waste water market is dominated by the government and municipal agencies
- Potential entrants can also look at opportunities in waste water consulting and design and manufacturing of the systems
Currently, only 20% of the waste in the residential segment is recycled but with this new regulation and booming construction industry, ValueNotes expects 60% of the waste generated by the residential segment to be recycled by 2015.