BUDGET EXPECTATIONS: CEMENT SECTOR

16 Jan 2023 , 02:49 PM

ICRA expects housing – rural, affordable and urban – accounts for 65-70% of the total cement demand in the country. The continued focus of the Government on agriculture and rural development is expected to boost rural demand, including demand for rural housing, which is a significant contributor (around 30%) to the overall cement demand mix. The pent-up demand of the last two years and the strong need to own residential properties, particularly, in the wake of the pandemic were among the major demand drivers behind the strong revival in the real estate sector. Moreover, the sales momentum has remained intact despite higher interest rates on home loans.

Increase in the deduction benefit available on interest and principal payments on housing loans availed by buyers can support the strong growth cycle. Enhanced tax concessions on income from renting of housing properties and removal of taxation on notional rental income can further boost demand for new properties. Schemes such as PMAY have played a pivotal role in improving home ownership and continued focus on budgetary and extra budgetary allocation to such schemes can improve access to housing in the low- to mid-income segments of the population. The pending expenditure on PMAY is over Rs 1.0 trillion, while the allocation was Rs. 480 billion in FY2023 (budget estimate) and Rs 473.9 billion in FY2022 (revised estimate). The allocation needs to be ramped up in the forthcoming Budget up to Rs 760 billion in order to meet the target of 50 million dwelling units under PMAY.

The Government is expected to continue taking steps towards achieving a Rs. 111-trillion infrastructure investment as per the NIP and provide a roadmap for its capex phasing over the next few years. The capital expenditure is expected to be increased by 15-20% from the Rs. 7.5 trillion in FY2023 BE, with focus on roads, railways and urban infrastructure segments. Asset monetisation was identified as one of the three pillars for enhanced and sustainable infrastructure financing in the country. The Government has targeted to raise Rs. 6 trillion of funds by FY2025 from leasing out public assets in sectors such as roads, airports, railways, mining, telecom, and housing, which could be used for funding investments under NIP. The expected continued focus of the Government on infrastructure spend is a positive for the cement sector.