Economy & Market
Affordable housing to amplify cement demand by 2%
Dharmesh Jain, Chairman and Managing Director, Nirmal,
believes that incremental demand in the country's cement sector will outpace the incremental supply over the next three years.
How successful is 'Housing for all by 2022'?
This programme has been the key driver of affordable housing in the country and simultaneously been a important motivator for the middle class and accelerated economic growth. True to the mission, in the past two years, the Government has successfully backed urban affordable housing by approving investments of approximately Rs 110,753 crore in this segment.
Additional measures were announced to increase its momentum, including interest subvention of four per cent for loans up to Rs 9 lakh and three per cent for loans up to Rs 12 lakh taken in 2017, and the number of houses in rural areas under Pradhan Mantri Awas Yojana (PMAY) was increased by 33 per cent. Multiple housing finance companies are providing loans under the PMAY and a large number of real estate builders have entered into this category, launching projects across the country.
How it is likely to benefit the cement sector?
The real estate sector is a significant demand driver for cement as 67 per cent of its demand can be attributed to the sector. In addition to urbanisation, specific government initiatives like 'Smart Cites' and 'Housing for All' have given a immense impetus to the cement industry. Increased budget allotment for rural housing, i.e., from Rs 16,000 crore Rs 23,000 crore in financial year 2017, is expected to amplify demand for cement by two per cent. According to research and rating agency CRISIL, the incremental demand in the country's cement sector will
outpace the incremental supply over the next three financial years.
Which states are progressing well?
Most states in the country are on already on the path of progress, but a few are going beyond routine and implementing policies to further benefit the segment and its buyers. States like Rajasthan, Uttar Pradesh, Tamil Nadu have taken up initiatives on their own accord by initiating admirable affordable housing policies.
Furthermore, Gujarat has witnessed an increase in economic growth; which has translated into an increasing demand for affordable housing. Swarnim Mukhya Mantri Shaheri Vikas Yojana and Mukhya Mantri Gruh Yojana are two flagship schemes initiated in this state which aim to not only benefit lower income group (LIG) and middle income group (MIG) but also make urban areas slum free and provide houses to the poor.
What kind of incentives are provided by the government?
Infrastructure status given to affordable housing has subsequently spurred investment activity in this segment. Under the umbrella of PMAY, multiple incentives targeted towards affordable housing have been initiated. Earlier this year, 100 per cent tax exemptions for private players constructing affordable housing of 30 square metre (sq m) in the four metros and of 60 sq m in other cities, approved during the June 2016 to March 2019 period, to be completed within three years of construction approval was announced.
By alleviating certain constraints on the supply side, the government successfully breathed life into this segment. With the Centre's attention on driving this segment, it only poses for more and more builders to join the ranks of the existing players in