Selection of Site for Industrial Unit | Urban, Rural, Sub-Urban

After having decided about the location in a particular area to establish industrial units, the exact site within this area has to be selected to set up the plant. The site selected may be an urban site, a semi-urban site or a rural site. The entrepreneur must consider the following factors, which influence the selection of the site:

Factors influencing the Selection of Site for Industrial Unit

Selection of Site for Industrial Unit

Selection of Site for Industrial Unit

1. Availability of Land

The land available should be sufficient not only for the purpose of establishing an industrial unit at its inception but also should be adequate to allow future expansion. However, the land that is to be acquired should not be too large because such a big land, exceeding its present and future requirements will result in locking up of cash in idle assets.

2. Availability of Building

Availability of building is another factor, which influences the selection of a site for industrial unit. The area of the building must be capable of permitting future expansion and the cost of the building must be within the limits of resources of the firm and its potential earning capacity.

3. Availability of Labour

Availability of suitable labour force at favorable rate is another important factor to be considered in the selection of the site. However, now-a-days availability of labour does not pose a very big problem because the labour is highly mobile.

4. Transport Facilities

The site should be connected with road, rail and water transport since industries require regular and sufficient transportation facilities for delivery of materials, despatch of finished product and for the use of employees.

5. Market Facilities

The size of the local market and the extent of demand for their products should also be taken into consideration

6. Ancillary Units

It should be seen whether the after sale services, repairing units and ancillary industries are available in the area.

7. Good Surrounding

It should be seen whether the site is located in good surroundings.

8. Other Facilities

The availability of other facilities such as banking facilities, educational facilities, housing facilities, tax concession etc. must also be taken into account.

Classification of Sites for Industrial Unit

The site to be selected for establishing an industrial unit can be classified into three kinds viz.,

  1. Urban site or city site,
  2. Rural site or country site, and
  3. Sub-urban site.

Each type has its own merits and demerits. Hence, the entrepreneur should consider the relative merits and demerits of each such site and should select one, which is comparatively most beneficial to him. Let us discuss the relative merits and demerits of the different types of sites.

1. Urban Site or City Site

Urban Site for Industrial Unit

Urban Site for Industrial Unit

The merits and demerits of urban site are listed below.

Merits of a City Site

1. There is sufficient supply of labour, both skilled and unskilled.

2. Financial institutions and banks are situated nearby.

3. Better transportation facilities are available.

4. Raw materials need not be purchased and stored in bulk.

5. Better repairing and maintenance facilities are available in cities.

6. Advantages of municipal/corporation services such as good roads, drainage facilities, fire fighting etc. are available.

7. Multi floor operations can be performed in a small sized plant.

8. Allied and subsidiary industries are also available.

Demerits of a City Site

1. Land is generally costly.

2. It is not an easy task to get a suitable site with required space. So future expansion of the unit is very difficult.

3. Disposal of waste always becomes a problem.

4. Cost of labour is higher.

5. There may not be good employee-employer relationship due to the close influence of organized trade unions.

2. Rural Site or Country Site

Rural Site for Industrial Unit

Rural Site for Industrial Unit

The merits and demerits of rural site or country site are listed below.

Merits of a Rural Site

1. The land is generally cheap.

2. Further expansion is very easy.

3. Taxes are low.

4. Staff quarters can be constructed at a cheaper cost.

5. Pure water is available.

6. Easy disposal of waste materials is possible.

7. Dangers arising from fire and other hazards can be minimized.

8. Quick disposal of dangerous fumes and by-products is possible.

9. There is less labour problem.

10. Free from the restriction of the municipalities and otherĀ  Government regulations.

11. Generally this is encouraged by the policies of the Government for economic development.

Demerits of a Rural Site

1. Skilled labour is very difficult to be obtained due to the lack of educational and amusement facilities, and exposure in rural areas.

2. Provision of housing facilities to the labourers and educational facilities to the children of the workers are really a difficult one.

3. Raw materials should be purchased and stored in large quantities, which result in locking up of more capital.

4. There may be problems in availability of transport facilities.

5. There may not be quick and adequate repairing and maintenance facilities available in the rural area.

3. Sub-urban Site

Suburban Site for Industrial Unit

Suburban Site for Industrial Unit

The merits and demerits of sub-urban site are listed below.

Merits of a Sub-urban Site

A sub-urban site enjoys the benefits of both the city and country sites, whereas it is free from the evils of both. Besides, a sub-urban site has various other advantages also. Hence, a sub-urban site is more suitable in most of the cases.

1. The land is relatively cheap.

2. Adequate area of land can be purchased and so future expansion is possible.

3. Better transportation and communication facilities are available.

Choice of Site for Industrial Unit

The selection of specific site is the outcome of a compromise between various considerations. The entrepreneur must take into account the various economic factors such as cost of the land, labour, materials etc. as well as the cost of marketing, which have a marked effect on the smooth functioning of the business undertaking.

Each type of site has its own merits and limitations. Hence the entrepreneur must consider each case individually and also make a comparative study of each of them so as to select a most suitable site.

Circumstances under which an Urban Site is Suitable

An urban site is suitable in the following circumstances

1. When the required number of skilled labourers is more than other categories of labour say unskilled, semi-skilled.

2. When there is a need for a close contact between the suppliers and customers.

3. When the various facilities available in cities are considered as important for the business activities.

4. When small area is sufficient for the activities of the unit.

Circumstances in which a Rural Site is Suitable

A rural site is favorable in the following circumstances:

1. When the area of the plant required is large.

2. When the by-products are harmful to human beings or the production process emits dangerous fumes.

3. When the large volume of pure water is required in the production process.

4. When the protection against sabotage or secret processes is required.

Circumstances in which a Sub-urban Site is Suitable

A sub-urban site is suitable in the following circumstances:

1. When the size of the plant site required is large.

2. When the plant is required to be situated nearer to transportation or market centre.

3. When there are restrictions on the construction of plant building in cities, as the cities are already over crowded.

4. When cheap labour is abundantly available in sub-urban sites.

5. When all types of tax rates are less.


To sum up, selection of a suitable site involves consideration of a number of factors. Hence, an entrepreneur must make his own judgement and finally select a site, which is most beneficial and suitable to him.