In the recent years, the construction equipment (CE) industry in India faced numerous headwinds because of the COVID-19 outbreak, nationwide lockdown, low equipment demand, economic slowdown, and more. Not to mention, most CE equipment demand is driven by road projects, which continues to suffer from a lack of adequate funds and delayed contract payments since the last year.
Given the current circumstances, infrastructure spend in both public and private sector is unlikely to improve in the near terms. Moreover, the revenue for the CE industry is expected to decrease up to 15-20% in 2020 estimates ICRA. Demand revival and accommodative public policy seem to be the only ray of hope.
Below, we look at the top trends in the construction equipment rental and finance industry in the CY 2020.
Collaborations with OEMs
Many Original Equipment Manufacturers or OEMs have exclusive contracts or tie-ups with major banks and NBFCs in India, in a move to extend financial support to the CE customers. Given the volatility of INR in the current times, OEMs and their dealers can collaborate with preferred lenders to provide enhanced credit approval and other financial solutions to the buyers.
Moreover, collaborations can be undertaken to improve the availability of construction financeto the borrowers – a way to boost the market for equipment rentals and used-equipment buybacks as well as exchanges.
Automated finance process
A typical equipment finance process takes around 5-30 days before the construction equipmentreaches the customer. To improve the overall process for CE finance, the sector has pushed for the automation of the finance process. Given the increase in technology-enabled operations across industries, the push comes as no surprise.
Besides, the need for transparency in the CE finance process can drive the automation need furthermore. This includes transparency in the entire transaction process, from documentation to the monthly equated payments on the loan.
Across industries, customer demand for personalised, allied services has pushed the demand for enhanced flexibility in non-standard, customised loan agreements in the CE finance industry. To thrive in the CE industry, many lenders now provide allied services which include bundling equipment, supplies, software, and equipment.
Especially now, as most CE buyers suffer from reduced cashflow, lenders can harness alternative CE finances, collaborate with OEMs on buyback schemes, create favourable rental options, and start pay-per-use leases to meet the market demand innovatively.
Additional Read: Will Construction Equipment Finance Market Grow Post COVID
To sum up
The construction equipment finance industry is presently in shambles. Especially as CE industry continues to experience decline in revenue and borrowers suffer from weak credit profiles, access to easy finance will remain dicey. Decreased asset lifecycle and insufficient rental penetration in the CE finance market will also add to the misery.
Nonetheless, for bespoke and convenient finance solutions, you can rely on Tata Capital. Avail of a tailor-made construction equipment finance with lucrative interest rate and favourable repayment terms. Our experts can help you find the best product based on the nature of your proposed project.
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