Parul
India’s cement consumption is expected to drop by more than 15 per cent in the current financial year due to weak property demand and a sluggish construction cycle, said Fitch Ratings. According to agency, more than 65 per cent of domestic cement demand is driven by the housing segment, but growth looks gloomy.
Meanwhile, steel demand is likely to fall by around 10 per cent, supported by a lower hit to demand from other sectors.
Fitch expects property developers’ operating cash flow to deteriorate on weak demand stemming from low consumer confidence caused by business uncertainty and unemployment concerns despite falling home-loan interest rates and cuts in transaction costs by some local governments.
Lower labour availability and disrupted raw-material supply chains are also leading to construction delays.
The Reserve Bank of India’s recent measures including loan restructuring, moratoriums and relaxed lending limits provide temporary funding relief to the property sector.
However, the underlying appetite of financial institutions to lend to the sector is likely to remain weak until there is a broader improvement in the sector’s operation with better end-user demand and pricing support.
Fitch expects developers with weak financial profiles or a focus on high-end projects who are unable to avail the benefits of the reserve bank’s restructuring scheme to be most affected.
Narrower capital access will lead such developers to tie up with large and reputable ones with strong financial profiles, creating significant opportunities for consolidation and market share gains for the stronger developers.
