CRISIL: Q1 growth in construction, allied sectors to fall ~500 bps

Polls impact, labour shortage and choked funds would mean 7-quarter low cement growth

After six stellar quarters, cement demand growth – a proxy for construction activity in the economy – is set see a sharp ~500 basis points (bps) decline to 3-5% in the first quarter of this fiscal, compared with 9-10% in the January- March quarter of last fiscal. This would be because of a slowdown in construction activity ahead of general elections, labour shortage and delayed release of funds by the government.

Construction States of Growth

Based on a sentiment survey of 250 entities across construction value chain, it underscored four drags:
  1. Restricted release of funds for institutional projects
  2. Labour shortage in wake of elections
  3. A Rs 50-60 per bag increase in the price of cement in the January-March quarter, which weighed marginally on housing demand, especially in the rural and individual segments
  4. Waning of the low-base effect of last fiscal
Graphs Construction States of Growth

Says Hetal Gandhi, Director, CRISIL Research, "At 2-4%, cement demand growth would be the slowest in the east (Bihar, Odisha) and south (Andhra Pradesh, Telangana and Tamil Nadu) during Q1FY20. Northern and central stateswould provide some offset with demand growing 6-8%on-yeardriven by constructionof roads, metros, and affordable housing. In the west, while Maharashtra will continue to show healthy demandgrowth with state elections looming, Gujarat will be sluggish."

Things, however, are likely to improve in the second half of this fiscal.

Graphs Key Driver Housing

"In the second half, activity in the institutionalsegment wouldincrease, leading to a 6-7.5%growth in cement demand this fiscal," added Hetal Gandhi, Director CRISIL Research.

Around 25 lakh units are under construction as part of Pradhan Mantri Awas Yojana-Urban as of April 2019. Additionally, the Ministry of Rural Development has set a target of constructing 50 lakh housing units under the Pradhan Mantri Awas Yojana-Gramin this fiscal. Apart from these, ongoing roads, metro, and irrigation projects, especially in Maharashtra, Rajasthan, Madhya Pradesh, and Uttar Pradesh will spur demand.

Graphs Key Driver Infrastructure

As for volume recovery, monsoon and rising fiscal deficit, including at the state level, will be the key monitorables.

And sustainability of the price hikes of Rs 50-60 per bag announced by cement manufacturers in February will be a function of how far demand revival goes.

Over the past six quarters, infrastructure and affordable housing push – including construction of 17 lakh housing units – ahead of the general elections, and pent-up demand following the lifting of sand mining ban in a few states, had boosted the construction activity.

Graphs Construction Sentiment Score

That led to cement demand growing at a decadal high of 12% last fiscal. South India piloted this growth, reversing trends of several years, followed by the eastern and central regions. The development of Amravati as the capital city of Andhra Pradesh (AP), irrigation projects (Polavaram in AP and Kaleshwaram in Telangana), pre-election infrastructure spending, and the construction of 2.4 lakh housing units in the past six quarters drove a 30 -35% on- year growth in cement demand in AP-Telangana last fiscal.

Graphs Construction Demand Growth

Construction demand also revived in Tamil Nadu after the fiscal 2018 ban on sand mining was lifted.

In the east, cement demand was up 25-30% in Bihar and 12-14% in Odisha and West Bengal last fiscal. Rural housing, affordable housing (Biju Pucca Ghar Yojana in Odisha), and infrastructure projects (metro, ports and roads) helped.

DMICDC Logistics Data Services appoints NEC’s Ichiro Oshima as new CEO

NEC Technologies India (NECTI) announced that DMICDC Logistics Data Services Limited (DLDS), a joint venture between Government of India represented by National Industrial Corridor Development and Implementation Trust (NICDIT) and NEC Read More ...

UP approves funds for ₹20,000-cr twin e-ways

The UP cabinet has approved ₹454 crore more for building two highways which will link backward regions of the state. The 296-km Bundelkhand Expressway and the 91-km Gorakhpur Link Expressway will cost ₹14,849 crore and ₹5,876 crore Read More ...

DMRC floats tenders for elevated metro corridor

Delhi Metro Rail Corporation (DMRC) has floated tenders for the design and construction of the 5.5km long elevated section of the 20-km Aerocity-Tughlaqabad corridor of the Phase IV project. The stretch will have four elevated stations Read More ...

M’rashtra clears ₹8,294.26-cr river linking project

The state government in Maharashtra has resolved to make Maharashtra drought-free by interlinking Wainganga and Nalganga rivers in Vidarbha and also planned to divert rain water in eastern Vidarbha to western Vidarbha. This project recently got Read More ...

Decks cleared for 900-km Chardham road project

Decks have been cleared for Char Dham highway project, which will connect four holy places in Uttarakhand through a 900-km all-weather road, with the SC clearing the decks by modifying an NGT order and that the apex court has allowed various works Read More ...

Arunachal pushes ₹900-cr road & highway project

Arunachal Pradesh has urged the National Highways and Infrastructure Development Corporation Limited (NHIDCL) to expedite the work on the strategic road which is being delayed for various reasons. In this connection, the state Read More ...

Railway fast tracks ₹137-cr Bridge on Yamuna

Troubled by speed restrictions of 30-km/hr and stoppage of rail traffic during the floods, Northern Railway in a latest move has decided to expedite work on the New Yamuna Bridge, which is being built parallel to the old one (Loha Pul), at an investment Read More ...

Ranchi metro rail project back on track

In view of the rapid expansion of the city, the state government of Jharkhand plans to build a mega metro rail project. The proposed monorail and metro project for Ranchi, which chief minister Raghubar Das had announced earlier, and was struck off Read More ...

Real estate awaits quicker eco clearance norms

Environmental clearance for real estate projects is being reduced to 60 days, said the Union Environment and Forests Minister. He said that small procedural delays are being eliminated without compromising on environmental concerns Read More ...

Assam pushes a flurry of bridge and road projects

In order to kick-start scores of road and bridge projects across the state, the Assam CM has urged the Union Transport Minister to launch the construction work of the bridge connecting Jorhat and Majuli for which the foundation stone has already Read More ...

Experts bet on J&K real estate market

The realty market of J&K is now open for non-residents. All standard rules and regulations of the Central government will apply in J&K, however, a state RERA policy must be formed to make the procedure and rules explicitly clear, said Anuj Puri Read More ...

Flexible Space Take-Up In India Reaches 4.6 Million Sq. Ft. In H1 2019

CBRE South Asia Pvt. Ltd, India's leading real estate consulting firm, announced the findings of its latest report titled 'India Flexible Space Digest – H1 2019'. According to the report, the overall flexible space take-up in India Read More ...

Wienerberger India Enables Significant Savings in Water Consumption at Construction Sites with its Novel Offering Porotherm Dryfix. System

As part of its strategic focus on developing sustainable and innovative processes in building construction, Wienerberger India has come up with a simple yet innovative solution through its Porotherm Dryfix. System that can help Read More ...

NHAI hastens Delhi-Jaipur road corridor

The Rajasthan government has fast tracked the process to acquire land for the northern corridor of the Ring Road connecting Jaipur-Agra NH with the Jaipur-Delhi National Highway. After identifying land in 26 villages of three tehsils Read More ...

WeWork forays into commercial realty space in Pune

While foraying into Pune’s commercial realty market, US-based co-working operator WeWork has taken on lease over 1.22 lakh sq.ft of office space to launch its 24th centre in the country. The company has taken over Panchshil Realty's Read More ...

200-acres of land parcels being auctioned in Hyderabad

The Hyderabad Metropolitan Development Authority (HMDA) has decided to auction 200 acres of land at Kokapet in Rajendranagar Mandal, which is expected to fetch it ₹5,000 crore. The state government is keen on auctioning the land Read More ...

New Building Material & Construction World

New Building Material & Construction World
MGS Architecture

Modern Green Structures & Architecture

Modern Green Structures & Architecture

Lifting & Specialized Transport

Lifting & Specialized Transport

Indian Infrastructure & Tenders Week

Indian Infrastructure & Tenders Week