Otis sees scope for growth in India's real estate market

The company, part of the $58-billion United Technologies Corporation, started its business in India more than a century ago

Leading manufacturer of elevators, US-based Otis, is betting big on India’s real estate market, mostly vertical, to grow its business in the country. In spite of all the talk of a slowdown in real estate, Otis Elevator Company’s president (Asia Pacific area), Patrick Blethon, who’s here for a week, told Business Standard that the pace of construction in India could create a new Chicago every year for the next 30 years in terms of the built-up area. The company, part of the $58-billion United Technologies Corp, whose links with India began more than a century ago with the elevator at Kolkata’s Raj Bhavan, is not just doubling the manufacturing capacity at its Bangalore factory from 5,000 to 10,000 units a year, but a second plant in India could also be in the offing.

“The plan is on the drawing board,” Blethon said, when asked if Otis wanted to open a second manufacturing plant in India. While the venue of the second plant has not been decided, it could be a toss between the South and the West. While currently the Bangalore facility only caters to consumption in India, there are plans of making India a manufacturing hub for global exports as well. At present, 65 to 70 per cent of its global volume is manufactured in Chinese plants. In fact, seven of its manufacturing plants are located in China out of a total of 14 worldwide.

Globally, China tops the list with its consumption of elevators at 500,000 a year, making for 60 per cent of new equipment around the world, and India is at number two with 47,000 units. North America is far behind in demand for new elevators at just 18,000 units per annum. Apart from being a saturated market, real estate growth in the American residential market is mostly horizontal. India, on the other hand, is in the middle of a vertical construction boom in the residential segment, though it’s facing a temporary blip.   

Having installed products and solution in landmark buildings like Eiffel Tower, Empire State Building, Burj Khalifa and even the Apple headquarters, Otis’ latest engagement with India is with Delhi and Hyderabad Metro. Delhi Metro has just placed order for 222 escalators, for its phase III project, according to the company. Before that, Hyderabad Metro ordered 670 elevators and escalators.

Responding to a question on slowdown in the Indian real estate market, Blethon said the company would be cautious over the next six to 12 months, though it has not been adversely impacted in its orders so far. Even its decision to open a second plant is likely to be taken after that, around the end of 2014, following an assessment of the real estate market across the country including tier two and three cities. Chunk of the company’s business is residential.

Otis is looking at the elevator density in India, which is at just 0.2 per 1,000 people, to project significant opportunity.

Going by the statistics of the country, India’s elevator density should be ideal at 11 per 1,000 now, estimates suggest. China’s density is at 1.4, US 4, Hong Kong 10.9, Europe 12 to 14 and Spain at a high of 20.  

 

On an average, an elevator costs $25,000 in India. But the cost could vary. For instance, at the Apple Centre in New York City, the elevators came for a few million dollars with only two storeys to cover, according to Otis officials.