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FY21 cement consumption expected to drop by over 15%
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SME Times News Bureau | 16 Sep, 2020
India's cement consumption is expected to drop by more than 15 per cent
in FY21 due to weak property demand and a sluggish construction cycle,
Fitch Ratings said on Wednesday.
Accordingly, more than 65 per cent of domestic cement demand is driven by the housing segment.
The
ratings agency said that 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,"
the ratings agency said in a report.
"Lower labour availability and disrupted raw-material supply chains are also leading to construction delays."
According
to the report, 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," the report
said.
As per the report, 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," the report said.
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