Rent or lease – what’s the best option
Equipment

Rent or lease – what’s the best option

Earthmoving equipment is essential in construction industry. Construction companies or contractors always need them for their projects. So far in India, they have adopted three practices, either they buy earthmoving equipment or they lease or they rent equipment. Renting and buying are prevalent pra...

Earthmoving equipment is essential in construction industry. Construction companies or contractors always need them for their projects. So far in India, they have adopted three practices, either they buy earthmoving equipment or they lease or they rent equipment. Renting and buying are prevalent practices while leasing has failed to pick up as a viable option.As construction industry is currently under pressure to be cost effective, therefore it is also under pressure to cut down capital expenditure and reduce the buying of equipment. So, the infrastructure sector has to select one option – either renting or leasing. But it is not easy. To make things possible, all the primary stakeholders – rental industry, OEMs, construction companies and financers should not only find a balance but also maintain a proper supply chain.An ideal model would be – that OEMs should sell equipment to equipment rental companies with the support of financers. Rental companies should provide equipment to construction companies either on lease or rent. This would also maintain the crucial balance of demand and supply of equipment.This will also help equipment rental industry to strengthen and enhance its capacity, which is crucial otherwise the above model will not work.Still it is necessary to examine and compare equipment leasing vis-a-vis equipment financing.First, one must know the financial health of business and accordingly proceed to make the right choice between equipment leasing and buying. Both offer a way to use best-in-class, updated equipment but it is important to see whether these are profitable and beneficial options as in both the options there is also a cost of running, operations and maintenance of equipment which is the reason, renting is a more profitable and beneficial model as compared to leasing and buying.Tata Capitals also mentions on its website that equipment on lease is more expensive as compared to equipment loans, especially if used for a long time. In addition to a monthly equipment leasing payment, you will also pay interest but will not have the equipment ownership when the lease is over. Not to mention, equipment maintenance is shouldered by the lender who usually imposes certain conditions for equipment operations.Renting offers flexibility, allowing you to pay for only the equipment you need for a limited period. This option benefits all the contractors whether big or small as it frees them from responsibility for managing equipment or fleet, operations, maintenance and repairs.It is not that leasing as model has not been tried in India but it has not been found beneficial and hence not in much use. Also, the equipment rental companies are not interested in this model as this doesn’t give them control over the equipment and machine is in complete command of contractor. Equipment rental industry is already facing a problem of excessively delayed payments and there have been cases where contractors have held the machines captive to force rental company to accept their terms and conditions. Leasing, which is also called dry lease, gives control of the equipment in the hands of the lessee, and it has been observed that the equipment is not used and maintained in a standard way, and consequently, it cuts short the life span of the equipment.So, leasing is a difficult option till market becomes mature and achieves a certain level of standardisation and suitable regulations come.Equipment rental industry in India is always looking to serve the construction companies in the best way and keep exploring different models of hiring or leasing to give more options and be beneficial to both the hirers and other construction stakeholders. This would need more time and deliberations between all the stakeholders so that best models could evolve over a period of time to benefit the industry.The article is authored by Satin Sachdeva, Founder & Secretary General, Construction Equipment Rental Association (CERA); Member – Representing India in Global Rental Alliance (GRA); and MD & CEO, Equipment Planet.

Next Story
Infrastructure Urban

Greater Noida Film City to Begin with Rs 1.5 Billion First Phase

Greater Noida is set to host one of India’s most ambitious entertainment infrastructure projects with the upcoming International Film City in Sector 21, along the Yamuna Expressway. The Uttar Pradesh government, led by Chief Minister Yogi Adityanath, is expected to lay the foundation stone in late June, either in person or via video conference. While June 16 has been speculated, the final date is yet to be officially confirmed.The project is being developed by Bayview Bhutani Film City Pvt Ltd—a joint venture between filmmaker Boney Kapoor and the Bhutani Group—in collaboration with the ..

Next Story
Infrastructure Energy

CCL to Add 2 New Mines, Boosting Output by 12 MT

Coal India subsidiary Central Coalfields Ltd (CCL) is set to commission two new coal mines in the 2025–26 financial year, aiming to enhance its annual production capacity by 10 to 12 million tonnes. The initiative is part of the company’s broader plan to exceed 110 million tonnes of coal production this fiscal and reach 150 million tonnes by 2030.“We have planned to open two new mines this year,” said Nilendu Kumar Singh, Chairman and Managing Director of CCL.Production at the Kotre Basantpur block, a coking coal mine with a peak rated capacity of 5 million tonnes per annum, is expecte..

Next Story
Building Material

India Cements Sells ICML Stake for Rs 980 Million

India Cements has announced the sale of its entire equity holding in Industrial Chemicals and Monomers Ltd (ICML) to Mirai Sensing Private Ltd for a consideration of Rs 980 million. The transaction was disclosed through a regulatory filing with the Bombay Stock Exchange.Following the completion of this sale, ICML will cease to be a subsidiary of India Cements, the filing confirmed.ICML, registered in Tirunelveli, Tamil Nadu, had earlier suspended operations. According to the company’s annual report for 2024, the business had become unviable due to reasons previously disclosed. The report fur..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?