The Indian infrastructure sector has seen a lot of development in the past decade. The development statistics suggest that construction segment would reach a growth rate of minimum 15% (CAGR) till the year 2020. This is very much visible with robust development taking place in the road construction segment,an  increase in housing projects –although real estate is going through a very rough patch, but this has not reduced Government’s spending on infrastructure development such as railways, metro rails, flyovers, underpasses, commercial complexes and roads. Alongwith this, there are various adverse factors affecting infrastructure and construction sector – those are delayed execution of projects, environmental clearances, regulatory norms etc. which in turn affects one of the fastest developing market in Indian economy that is of – Construction Equipments.

Construction Equipments market has seen a sea-change in its development and growth over the past few years wherein majority of the manual intervention in the construction process is taken over by mechanized processes and hi-tech machines. There is massive growth potential in Indian infrastructure and construction sector, which becomes a major reason for development in the construction equipment market.

Major equipments ruling the construction equipment sector are – Backhoe Loaders, Excavators, Cranes, Loaders, concreting equipments and compaction equipments. These equipments have led to hassle-free construction activities, that makes the process of construction efficient, easy and cost-effective. There are numerous manufacturers leading the new construction equipment market and have significantly contributed towards growth in this sector. JCB, Liugong, L&T, Komatsu, Caterpillar, BEML, Tata Hitachi, Tata  Motors, Hyundai, Volvo, Sany, Liebherr, Schwing Stetter, Escorts, Macons, Ace, Ajax Fiori, Case New Holland, etc. are major manufacturers ruling new construction equipment segment.

It is needless to mention that not just new construction equipment, but also used construction equipment market has seen noteworthy growth in the past few years. The necessity to buy used construction equipments is driven by various factors that has helped to develop the parallel market of construction equipments at par with new construction equipments.

Factors affecting decision to buy Used Construction Equipment:

1. Usage of Construction Equipment

The demand of construction equipment is driven by its usage in terms of tenure and terrain. Suppose there is a prestigious road project of Indian Government in the state of Assam, which requires working for only three months due to its rough climatic situation and accessibility to that location is very difficult, then, in such a scenario, it becomes very difficult to move new construction equipments to the project site because buying them for three months will be improper financial decision of the project contractor. Instead, the contractor may proceed to buy used construction equipments after proper quality check from the nearby location and also, can rent them from the locals, if required machinery is available and carry on the work at its project.

2. Pricing and Viability

For starting a new project or while giving construction equipments on rental basis, it becomes a crucial decision for the contractor or hirer whether to buy new or buy used construction equipment. This is because of the initial capital expenditure associated with the purchase of new construction equipments. If we look at Equipment Hiring business, it makes more sense to buy used construction equipments after proper evaluation of the technical aspects of the machine because, hiring charges are revenues and that is for a periodic duration, a new construction equipment’s viability may not be positive if given to any company on hire basis.

3. Project Tenure

It is important to keep in mind the tenure of project before taking a final decision on buying used or new construction equipment, as it can result into financial losses for the buying company or contractor.

4. Availability of Good Quality Used Construction Equipment

With the high demand of used construction equipment, statistics suggest that used construction equipment market is growing at the rate of 8-10% (CAGR). Big business conglomerates have a special team of technical experts to refurbish their used construction equipments and put them on sale after completion of a very huge infrastructure project on which high amount of capital expenditure was done in buying new construction equipments due to regulatory norms or the terms and conditions of project principal.

5. Cost of Maintenance

To determine whether buying new construction equipment or buying used construction equipment makes more sense, maintenance cost of equipment plays a vital role. Once a big renowned contractor decided to buy a huge fleet of used construction equipment - transit mixers for its project requirement and after proper valuation of gamut of assets, he finally purchased those used construction equipment- transit mixers. But, later on, after completion of the project in question, the contractor realized that the amount spent on maintenance of these used transit mixers was on a very higher side and has hampered revenues earned from that project. In an ideal situation, this contractor should have clubbed two kinds of construction equipments – new as well as used – so that benefit of depreciation from new construction equipment could have improved its profitability and low cost of used construction equipment   could have impacted its initial capital expenditure.

6. Restriction on availability of new construction equipment

Above-mentioned factor is very valid for used refurbished imported cranes, which has a big market in used construction equipment segment. Buying new high-end tonnage capacity cranes from outside India is not a viable option for contractors and hirers based in India. Instead of this, big crane hiring companies, are involved in import of used refurbished cranes from various countries – Germany, America, China, etc. which in turn makes availability of such used cranes easier and viable for executing many of the infrastructure projects – metro rail project, construction of underpasses, flyovers and bridges, etc.

7. Ease of Financing

Leading banks and financing companies have made a special team of their employees to focus on financing of used construction equipments. This decision is a result of the rapidly growing market of used construction equipment buyers as well as sellers. The financiers provide easy access to re-finance (financing pre-owned construction equipment) and re-purchase finance (i.e. used construction equipment purchase financing) facilities by reaching out to the either sides of transacting parties – seller or buyer of used construction equipments. The benefit to financiers with such schemes and product is yield earned.

With such factors in place, it becomes easier for construction companies to decide on buying used or new construction equipment. After all, businesses exist for earning profits and profits are mainly results of correct decisions taken at the right time.