Current & future demand drivers: HVAC Industry

Kanwal Jeet Jawa writes about the Indian HVAC sector being expected to grow by nearly 30 per cent to over 235 billion Euros over the next two years while also throwing light on the current and future demand drivers.

Kanwal Jeet Jawa

Kanwal Jeet Jawa

Heating, ventilation and air conditioning (HVAC) systems, which control temperature and air flow in a built-up unit, have today become an integral part of the real estate planning processes, thus becoming a leading contributor to the continual growth of an economy. Applying the said use-case to the Indian economic parlance, the robust growth of the real estate, hospitality, health and education sectors have similarly complemented a positive growth of the domestic Mechanical, Electrical & Plumbing (MEP) industry, under which the Indian HVAC sector has flourished as well.

Today the Indian HVAC market is growing at a rapid pace which can be attributed to the huge rise in domestic real estate construction activity. Per a recent estimate by Indian Society of Heating, Refrigerating and Air Conditioning Engineers (ISHRAE) the HVAC products market in India is currently valued at Rs. 15,000 crore, having grown from a Rs. 10,000 crore valued industry in 2010. ISHRAE also states that the Indian heating, ventilation and air conditioning (HVAC) market is expected to grow by nearly 30% over the next two years to boast of a capitalization of over Rs. 20,000 crore, which will be mainly due to the buoyed acceleration in infrastructure and real estate sectoral activities.

In the past decade the Indian HVAC sector has prospered on the back of swift action in sectors like retail, hospitality, health care, commercial and special economic zones (SEZs), which intricately require HVAC systems for their sustenance. It is thus that going by the industry estimate of Indian manufacturing sector touching a capitalization of $1 trillion by the year 2025, opens huge optimistic growth windows for the domestic HVAC sector.

Experts believe that riding on positive policy decision by the new government, the Indian HVAC sector is expected to grow by nearly 30% to over 235 billion Euros over the next two years, which will be much higher than a 117 billion Euros capitalization achieved in the period between 2005 and 2010. With major influence factors like the continual growth of the MEP sector, positive investor interest in the Indian real estate sector along with focused government policy initiatives becoming important demand drivers in the industry, other factors like growing consolidation in the market and greater ‘Green’ technology awareness have also helped create a firm footing for the industry.

Today the Indian HVAC sector aims to provide cost-effective solutions that cater to the needs of the commercial and industrial customers by introducing eco-friendly systems. These systems put in place by phasing out hydrochlorofluoro carbon (HCFC) gas have played a major demand driver’s role in the bloom of the sector. With energy conservation and implementation of greener measures being one of the major standouts of the industry, the move away from non-greener refrigerants towards more sustainable technologies is being seen as a major demand driver in the industry; one that will set forth a future course of action for the industry.

While today, greener HVAC solution is the major demand driver for the industry there are some other critical drivers like the growth of the Indian real estate sector’s reliance on installing HVAC units as essential components that have helped in the flourish of the sector. Also important to outline is the fact that a greater upgrade in technologies and constant innovations in the HVAC market has resulted in the acceptance of cutting edge innovations by the potential consumers, that has lead to the growth of this industry.

Today the country’s forward-looking policy measures brought into the sector have streamlined the workings of the industry. This has also led to a major revamp in strategies which have played a vital role in creating pertinent demand in the industry. Government policies on refrigerant use, stricter eco friendly norms and safety pre-requisites, efficient use of products, services and technical usage have made the players in the market realign their strategies that have played a greater role in creating a pertinent demand in the industry.

Also critical to mention other demand drivers like construction of greener buildings that conform to sustainable design construction standards thus reducing the consumption of energy, water and natural resources; Increased demand for HVAC units with smaller capacities along with a resurgent interest in the hi-wall segment vis-à-vis wall and window air conditioners; more consumers preferring energy-efficient products with non- ozone-depleting refrigerants and greater awareness towards star labelling along with faster growth of variable refrigerant volume (VRV) systems and inverter based air-conditioning solutions, that are some strategic trends complementing the demand in the sector.

While there is a buoyed interest in the Indian HVAC sector based on the above-mentioned positive demand drivers, challenges also remain that hold back the sector from achieving its true potential. A slowdown in the Indian construction sector of late is directly affecting sales in the HVAC market, where a lower construction activity in real estate diminishes the demand for HVAC solutions. Also the fact that there are huge power discrepancies in the country where the demand for power constantly outrun the supply in peak seasons create an mental block in the minds of consumers. HVAC traditionally being a more power intensive appliance makes consumers wary of buying HVAC appliances which negates the growth in the sector. While established players are still reluctant to incorporate latest technologies, the entry of unorganized players churning out low cost sub-standard products wobbles consumer faith thus leading to a diminished growth of the sector.

Once these challenges are addressed proactively, the Indian HVAC sector can start looking towards becoming a leading contributor to the Indian economic resurgence, and thus can fulfill its true potential.

(The author is Managing Director, Daikin India.)

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