PEST refers to all political, economic, social and technological factors affecting any industry.

The objective of PEST analysis is to objectively study the environmental factors facing a firm, company or an industry. The external environment affects the company in many different manner and unlike internal environment it cannot be influenced much. Political Factors The political factors affecting the construction and housing industry mostly consists of documentations and permits that has to be obtained during the various phases of construction of a structure and its sale. Building Commencement Certificate: Construction of a building or any such structure cannot take place unless and until the builder or the company secures a commencement certificate from the authority, in case of Mumbai it is the BMC who gives IOD&CC- Intimation of Disapproval & Commencement Certificate. Floor Space Index (FSI): FSI is basically a ratio, which determines how tall can buildings or a structure can be constructed on a particular plot. The local authority issues it. Occupation Certificate: After the completion of construction work of a building, the builder or the company has to secure an Occupation Certificate without which the flats in the building cannot be occupied for residential or commercial purposes. Brihan Mumbai Corporation [BMC] Developing Plans: BMCs developing plans form the most basic criteria in selecting a site. These developing plans chart out pre-defined areas, which the BMC has already allocated for certain purposes. E.g. In a given area, some land is reserved for plantation/farming, some piece is kept for industrial establishments like the MIDC area and the other one reserved for residential purposes. So the Builder finds out the type of land, which is suitable for his purpose, i.e.; if he wants to build up a residential complex, then he has to do so in the area reserved for residential purposes; as per the BMCs developing plans. CRZ (Coastal Recovery Zone): According to this rule a builder cannot carry out any construction within the radius of half kilometer from sea. TDR (Transfer of Development Right): This right is available to a builder for utilizing the additional FSI. Normally TDR is given by the local Municipal Authority who acquires the portion of land of builders either for the purpose of constructing road or for making gardens. Others: Apart from the above mentioned points there is also tax exemption that is given for the construction of building on the land having area of more than 1 acre. Economic Factors Fluctuations in prices of inputs: Many builders tend to stop work when the prices of inputs like cement, iron etc goes up so as to wait for the time when they expect the prices will come down. This result in unnecessary delay in the work and the cost of wasting time would actually be more than the increase in price. Changes in demand: Changes in demand due to factors like changes in disposable income of prospective buyers and inflation. Also with the easy availability of housing loans and tax exemption on loans the demand for houses is rising.

 Future Growth & Resale Value: Any project must be located in an area that if not fully developed must at least be on the way. This is because people prefer those areas having high resale value and will fetch them a good amount of gain. Stamp Duty & Registration: Payments of Stamp duty followed by the registration of the agreement are two important acts when one enters into an agreement with a developer/seller. With the decrease in the stamp duty by 50% it is considered as a good sign for Construction Sector. Social Factors Credibility of the company/firm: People dont know what kind of materials has been used in the construction of a building or a structure. Credibility of a builder or the company plays an important role in convincing the buyer to buy the house and be sure of the quality of construction work done. A low credibility or image can lead to poor financial performance. A good image is not just built in a day, it takes years of servicing the society through following high standards of work in the process of construction and sale. Perceived Image of the property developed: A flat in a so-called posh area may cost much more than a one in a not so posh area. This factor can also determine the success of failure of a project. A flat is selected on the basis of infrastructure facilities like water availability, transport facilities, nearness to schools, colleges, hospitals, shopping complexes, leisure centers, etc. Building Facilities: The builders may offer buildings that have swimming pools, health-clubs, gyms & parks. Technical Factors Due to technical nature of the construction process, the technical environment keeps on changing everyday. There are developments in techniques used, materials used and various other such aspects of the construction business. A few of such developments are as follows Pre-structured Concrete Blocks: These are blocks of concrete, which are made in the factories according to the dimensions of the building or structure to be built. It is just like a jigsaw puzzle where these blocks are put together using a huge crane and joined together using mortar by workers. This enables quick completion of work and also economies of scale. Mixture of Cement and Sand: nowadays in order to save time the constructor can order the mixture of sand and cement directly from the suppliers as against the traditional way of ordering cement and sand separately and then filtering them and then mixing it. Other Equipments: other modern machines that are used in construction are the use of huge drilling type of machines to dig the ground, which was before done by workers.