The organised building material sector is likely to witness revival in growth as one of its major user industry, which is the residential real estate market, is expected to see better times, says a report by ICIICI Securities. In the last few years, building materials industry’s fortune was badly affected by series of events like demonetisation, slowdown in real estate industry, etc. However, turnaround in real estate’s fortunes may also help to revive the building materials industry.
According to the report, the organised building material sector is poised for strong growth in ensuing future, led by 1) depleting quantity of real estate residential inventory, 2) revival in post-pandemic housing demand, 3) consolidation in real estate market, 4) spending on infrastructure, 5) government thrust on housing through schemes such as PMAY, 6) improved affordability of buying houses and 7) one of the lowest mortgage rates (6.5%-7%) in India’s history. Also, the recent phenomenon of work from home (WFH) due to the pandemic has resulted in many households upgrading/spending on home improvement which is thus beneficial for the building material sector.
Large organised players are also expected to continue seeing market share gain from unorganised/regional players post the pandemic. This is due to their ability to manage supply chain better and thus provide finished goods on time and regularly to channel, a strong balance sheet whereby they manage working capital better in a rising raw material price scenario, and increasing preference of consumers toward branded national players.