INDIAN ELEVATOR INDUSTRY ANALYSIS FOR CASE

With infrastructure development and growth in the real estate industry, the market for elevators and escalators is on an upward spiral. According to industry experts, all metros and upcoming cities with an urban population of over one million, are growing markets for elevators and escalators. The Indian elevator industry is growing at a rate of 15 per cent to 20 per cent year-on-year with about 30,000 elevators and escalators sold per year.

Residential buildings and commercial establishments like shopping malls and call centres along with infrastructure projects like airports and metro railways are driving this growth. However, one fact that needs to be kept in mind is the safety aspect of elevators and escalators. With an increasing number of malls and high-rises coming up in Tier-II and Tier-III cities, one needs to ascertain if the market is ready to ride these high-end contraptions.

The Bombay Lift Rules of 1958 mandate that every lift be inspected once in six months. However, the Public Works Department is often unable to undertake even one inspection in a year. While there are a total of 71,742 elevators across Maharashtra, the total number of PWD lift inspectors is not more that 50. “It takes about three hours to inspect a single elevator in an average 25-storey building. It is not humanly possible for the PWD to ensure the safety of every elevator in the state on a regular basis,” says TAK Mathews, member of the International Association of Elevator Engineers and of the National Association of Vertical Transportation Professionals (USA).

Mega Elevator Opportunities in India – Curtain Raiser

Rajah Venkatraman (Fortune Consultants Ltd., Asia)

Another logical prophecy – “There is great explosion waiting to happen in elevator industry in India”. The prediction of sudden spiraling of demand explosion and such requirements driving the opportunities for the elevator industry is detailed in given with full statistical data. The ways of working in India is explained to the benefit of industry people to participate in such golden opportunities.

Category: Issue 6/2008 Posted by: Editor

Reviewed Statistics for Elevator demand: for new buildings and existing buildings (due to reasons) and types of Elevator/ components requirements Supply opportunities to meet demand: For major/ minor / component / replacement / maintenance players Arrangements – by

manufacturing/ Distribution from overseas arrangement governmental regulation, the support structure, labour structure, the costing for these.

Analysis of elevator Requirement

 

There is logical reasoning of the huge elevator requirement that is happening in India. The different sectors of elevatorings industry can use this opportunity to be part of this happening. The ways to set up an establishment is also explained and also the approximate costs of the industry explained for the benefit of the industry people eyeing this opportunity. The requirement is partly as per the regular development scenario and this can be multiplied many folds if the suitable supply is effected according to the needs of the masses.

People know India from history. In the elevator industry, people now know Dubai from the “Burj Dubai” the “World’s tallest tower” in the making. And there is a huge amount of construction happening in Dubai and large numbers of elevators are being provided. India is very close to Dubai . Hence people always consider that similar scenario exist. It is actually very different. Lots of people have told that India gives a “Humbling Effect” looking at the difficulties of people like “Human drawn carriages” carrying people (with men running like horses). Actually most of the things in India are not luxury if you look at it from humanitarian or human rights point of view. They are basic necessities. In a place like Dubai the elevators may have very high speeds, may be laced with expensive material and probably splendor splashed on the elevators and elevator lobbies. In India it is considered absolutely as the basic mode of transport to take you up to your floor. People would climb many floors on their apartments since they could not afford even the cheapest elevator. Sometimes, in the older building the apartments on higher floors cost less due to the various difficulties like elevators etc. not being very convenient. Most of the buildings are limited to low rise only.

High rise buildings are a small percentage of the buildings. But for the population existing (and increasing in folds) it is necessary to add numerous tall buildings for living, also as the land area is limited with large coastal areas.

In Dubai the population of citizens or original sons of the soil is very low. The huge numbers of buildings planned are mainly to cater to the expatriates visitors. Either attracting as overseas homes for expatriates or fancy Hotels for visitors/tourists. Hence, comparatively the elevators also reflect the high class. This is not so much need driven by the local population. There is a constant requirement to feed these buildings hotels, offices, holiday homes with continued occupancy for the future which depends on the capable governance (as seen carried out efficiently).

Population the major factor

The huge population is making it a basic necessity for buildings to go vertical and hence requiring elevators. (This is the single most important reason). Population in 1991 was around 843 million and in 2001 it is around 1,150 million and in a few years in 2011  1,300,000,000! (Projected).

Projected Total Population of India, it is approximately distributed as follows:

 

We can work on the urban population of approximately 350 million people, from these projections.

These states in turn have 3 or 4 satellite cities of importance. Hence, the population and importance is distributed. There are smaller like Goa, Pondicherry, Chandigarh etc., which may have low population but have large tourism interest and hence have developed well.

Uniform distribution pattern of requirements

The map shows uniform distribution of population and the country has progressed also uniformly as explained.

Due to historical importance of many cities almost all the cities are having uniform developments. For example in Tamil Nadu – Chennai, Trichy, Madurai, Coimbatore, Tuticorin all equipped with airports, major hotels, manufacturing/ tourism/trading/computers and other industries Mega elevator opportunities in India – curtain raiser

Need of the indian masses

We have to take a leaf out of the auto industry. A decade ago the author (Raj) in a presentation had mentioned that India required a different type of car to suit the masses. Now it is a reality. The whole world in looking in surprise at what has been made available to the common Indian “Welcome to India!” “Understand Indian Needs!”

“Tycoon Ratan Tata, the 70-year-old who heads the tea-to-steel Tata group, unveiled no frills Nano at the Geneva Auto Show. Tata touts the Nano as the World’s cheapest car at just Rs.100,000 ($2,500, 1,600 Euros), aimed at Indians hoping to trade up from a motorcycle to four

wheels. The basic model has no air conditioning, no electric windows and no power steering” was quoted in the news. This is actually the need of the masses.

In India large masses require help. They need cars but need not have all the frills. They need elevators, not necessary to have frills again. There is a huge population that is desperate to handle their basic needs. As can be seen from pictures which speak for themselves. People would travel on top of the trains / buses to reach their destination (Figure 3 & 4). It is not the comforts it is the need to “manage” or “reach”. That is why when people are in a much enviable situation and still complain they should probably visit and see the troubles taken by these masses (with even cheer on their faces often!) it would for sure give “Humbling Effect” to say “we are a lot better off”. Now if there is an elevator solution to these masses then it will be received with prompt acceptance like it is probably happening for “Nano ”.

    

Residential Building

Approximately 350 M people are expected to be in the urban environments. 350 M people with 7 person in each family 50 million families. 42.5 million families live in apartments (100 families per apartments buildings is 42.5 million/100 = 425,000 buildings of which above 5 % require elevators i.e. over 21,250 buildings). These would be High end apartments requiring elevators like in any other part of the world.

The low end apartments, the balance 90 %, has the potential to be converted to “building with elevators” and this would depend upon the provision of economical no frill, safe elevators (like no frills airline) and this is a large opportunity area additionally.

15 % of them stay in villas and that is: 7.5 million villas. 5 % of the villas can be considered top end with 2 floors and above, that is 375,000 deluxe villas. These deluxe villas are potential for providing economical home lifts. This can also be considered potential area for providing lifts.

Hotels/Offices Building

Additionally Hotels / High End office (supplement to residential buildings) would have elevators being “A” Class. But Smaller Hotels/Ordinary office again (supplement to residential buildings) would provide lifts if found to be economical (no frills as mentioned earlier). The second category is again additional potential.

These are in addition to the residential units as all the working population has to be housed in offices buildings and have to be housed during travels (largely business and occasional holidays).

Airports, Expansion of Retail Trade

Lots of airports, MRTS, shopping complexes, theatres, etc. are also mushroom ing will also require large number of elevators and escalators. The cities are getting modern and more sophisticated.

Other Elevator Dependants

Looking at the growing population of older aged Indians, about 8.5 % population is in the Senior Citizen category in the others about 9 % of total population is having medical constraints or handicapped (apart from Senior Citizens). 8 % is children below 3 years.

It is also noted that Houseless Population is 1,900,000. Very insignificant numbers, hence goes to confirm all others are housed!

Other factors influencing more elevator requirements

Relative Prices

The necessity is the key word in India and with time there have been some consolation to be able to provide elevators in apartment buildings. The cost of elevators has not increased much over the years. For example, years ago, if the apartments would cost about 10,000 $ each and the elevators would cost as much as three apartments. Now the same type of apartment would cost around 100,000 $ each (due to increase in land cost) and the basic elevators would cost about 1/3 the price of one apartment for a small sized building. Hence now the provision for elevators has become a very small component in the building and is immediately accepted, widely. Elevators also help to make the building go more higher.

Local Regulation

In quite a few cases the governments have also made it mandatory to have elevators for buildings of about 4 floors & more. Hence, the apartments have to necessarily have elevators.

Government Subsidies

The Government suppliers electronics/ easing on elevator prices while the cost of petroleum products is going up (relatively). This makes the (nearer) urban vertical housing (apartments) a stronger proposal, than traveling to their distant rural town homes.

Hire Purchase

Earlier, a person can never save to get to the market price. With the hire purchase and mortgage systems which have only now been well established, it makes it possible to possess the apartments. So as more apartments taken, so more elevators required. Hence, crowded joint family homes are breaking down into more single family homes in apartments.

Preferred Investment

In other areas of investment there have been huge collapses like in share/stock markets which have driven people towards presently more safer form of investments in real estate and hence more need for buildings and hence elevators.

Comfort Levels

In the modern world, compared to old times and comfort levels of individuals are also increasing and hence they would have the elevator than walk up the building of 3 floors or above.

Type of elevator requirement

The taller towers are normally considered as a difficult proposition to handle from civic, maintenance and other factors. Hence, elevators would bear the brunt of such situations, if the building management is not good or if the residents do not cooperate in taking care of maintenance commitments and then the whole support system fails. The elevator provision / maintenance if not done properly it will be badly affecting the building on day to day basis. Hence, low rise and mid rise is the generally preferred requirement of buildings and the elevators required would also fall in the category.

Of course Mumbai, for example, is a city with much less land area (and having to reclaim land from the sea) there is a tendency to have taller towers. Most of the other cities it is not need driven to have tall towers. However, to accommodate the huge population requirement it is considered as an economic optimization to go upwards as the cost of land gets higher. However, presently large number of buildings are planned between 3 and 10 floors in the urban area.

Type of elevators would also depend upon type of buildings. The type of buildings and location of buildings largely influence the decision on type of elevators. High speed elevators to serve upper exclusive floors and pent houses would be important in such Class “A” buildings.

The pent houses are also not the fancy as each city has upper crust of the society living in certain areas and other areas are just about ordinary. For example in Mumbai the high end would stay at Malabar Hills or Nariman point places like that and then a pent house in that area would be considered as icing on the cake.

But if you live at the low end and stay at the pent house it does not attract any attention. Hence, “Pent house” concept is only driven by the location. Hence, there is a cream which would use a good class of elevators and using zoning/VIP service etc. to cater to the elite residents at the top of the building. But the large majority would not be too much concerned about the higher speeds or fanciful elevators but treat it as a mode of transport.

Establishment set up for meeting the elevator

Setting Up Arrangements for Elevators Supply, Possible Supports

It is very much preferred to have locally accessible company more than on overseas based company (This is well understood from the fact Suzuki, Hyundai, Fiat, Morris etc. who are not market leaders in the Global auto industry have hit unbelievable sales volume in India due to the fact that they setup shops in India).

Indian support structure is also useful due to good computer skills for Company needs, availability of internationally cheaper industrial lands etc.

Close Proximity Sea access in all directions to farther countries and well connected central position by air from East and the West. This will be useful for import/export activities of the company. Feasibility of Public participation in company funding also exists.

Costing on local support infrastructure

 

The procedure to set up office for establishment

Obtain director identification number (DIN)

For that obtain the provisional DIN by filing application Form DIN-1 online. The application signed and sent for approval along with proof of identity and proof of address. – The concerned authority verifyes all the documents and, upon approval, allocates a permanent DIN.

Obtain digital signature certificate

To obtain a Class-II Digital Signature Certificate, company directors submit the prescribed application form along with proof of identity and proof of address to authorized agencies.

Present name of company for approval to the Registrar of Companies (ROC); Get the memorandum and articles of association vetted by the Registrar and printed

Company name approval must be done electronically. Once a name is approved, the Memorandum of Association and Article of Association together with miscellaneous documents have to be fi led within six months of the approval.

Make an application to the Superintendent of Stamps or an authorized bank requesting for stamping of the Memorandum of Association and Articles of Association

The application should be accompanied by the following: (i) Unsigned copies of the Memorandum of Association and Articles of Association (ii) Payment receipt. Ensure that the copies submitted to the Superintendent of Stamps or to the bank for stamping are unsigned and no promoter or subscriber has written anything on it by hand. The Superintendent returns the copies, one of which is duly stamped, signed, and embossed, evidencing the payment of the requisite stamp duty. Once the Memorandum and articles of association of Company have been stamped, the same is required to be signed by the promoters of the Company including commencing with the name and description, father’s name, address, occupation, and the number of shares subscribed for in their own handwriting which is duly witnessed. After signing the documents are to be dated.

Certificate of incorporation

Copy of Form 32 along with the consent letters of the Directors of the Company, who are appointed therein – Form 1, application and declaration for incorporating of a Company and printed on non judicial stamp paper – Form 18, evidencing the address proof of the company Form-1A, evidencing the name of approval – Copy of challan evidencing the fee with respect to above mentioned forms – Power of attorney from the subscribers for in favor of any person for making corrections on their behalf in the documents and papers filed for registration. This must be on non judicial stamped paper – Identification of the subscribers by way of copy of driving license, passport, or voter identity or ration card. These documents in addition to their online uploading are also to be fi led in original with the ROC. Once the documents are uploaded and confirmation of payment of fee is received from the Bank by the ROC, it processes the papers in order of their receipt . The ROC will then scrutinize the documents filed by the company and if necessary, the authorized person will on intimation make the necessary corrections under his initials. That authorized person will be provided the obtain the certificate of incorporation of the company from the office of the ROC. The company can commence its business on getting incorporation certificate from ROC.

Other Procedures include the following

 Obtaining a company seal for use  Obtaining Permanent account number

Under the Income Tax Act, 1961, each person is required to quote his permanent account number (PAN) for tax payment and tax deduction account number (TAN) for depositing tax deducted at source.

 Obtaining a tax account number for income taxes deducted at source  Registering for Shops and Establishment Act, 1948

 Registering for Value Added Tax (VAT) before the Sales Tax Officer of the ward in which the Company is located

 Registering for profession tax

 Registering with Employees’ Provident Fund Organization

 Registering with ESIC (Medical insurance)

Conclusion

Various scenarios have been presented to highlight why there will be large requirement of elevators. Also adapting to the underlying demand by providing solution with elevators for the masses the elevator volumes can go up many folds as there is a basic need. The setting up of companies is also very clearly explained in procedure and the support systems are also seen as more favorable. Hence, the elevator industry should take up this challenge and use this opportunity favorably.

Acknowledgements

Thanks to my daughter Sneha for assisting on this paper and to my guide and advisor Jim Fortune

References

Census of India, News from KT, GN & AFP etc.

Biographical Details

Rajah Venkatraman is the Director of Fortune Consultants Ltd. in Asia with offices in Dubai, Abu Dhabi and India. He is a graduate of Engineering from the reputed Indian Institute of Technology. He underwent a course at the reputed Indian Institute of Management and a Course in International relationship at the Bombay University. He had started in the elevators industry with Otis in the Mid 70’s then worked with Mitsubishi.

This paper was presented at ELEVCON Thessaloniki 2008, the International Congress on Vertical Transportation Technologies and first published in IAEE book “Elevator Technology 17”, edited by A. Lustig. It is a reprint with permission from The International Association of Elevator Engineers iaee