‘Housing for all’ initiative has many sectors excited

The Centre’s ambitious ‘housing for all by 2022’ initiative has created excitement among the players in the cement and steel sectors, as well as real estate developers.

To meet the shortage of 300 lakh houses in urban areas by 2022, Urban Development Minister M Venkaiah Naidu is holding talks with financial institutions, real estate developers and other stakeholders.

While the blueprint is not yet out, the Minister said he was looking at various models such as escrow account to reinvest the revenue generated by enhanced housing activity in the same sector, besides interest subvention to home buyers and public-private partnership models.

Real estate developers feel that this will revive the housing sector, but there are many challenges, including lack of marketable land parcels, high cost of construction, lack of information and excessive control on development of land.

RK Arora, CMD of realty firm Supertech, said, “Despite a burgeoning demand, developers are currently hesitant to initiate affordable housing projects mainly because of lower margins associated with the segment. Tax exemption will fuel their enthusiasm to take up more affordable housing projects.”

Omaxe, an affordable housing player, is currently executing 42 projects. Mohit Goel, CEO, Omaxe, said tax subvention on housing or increasing tax exemption could spur demand.

The government’s expected thrust on urbanisation and infrastructure in general, and affordable housing in particular, has caused some excitement in cement and steel sectors. For cement, with demand falling during the down cycle of the last two-three years, sector analysts now expect an uptick in demand which would help companies such as UltraTech, ACC, Ambuja and others to finally use their built-up capacities fully.

While some expect the turnaround to be immediate, others say it will come by fiscal 2015-16.

Brokerage firm ICICI Securities in a recent report, said, “We expect the first quarter of fiscal 2014-15 to be a turnaround quarter for cement companies with industry volume growth rebounding to 8 per cent, albeit on a low base of the past year.”

“With a stable government at the Centre and a revival in infra spends, demand growth is likely to be more than 8 per cent over the next 3-4 years while supply will grow only around 5-6 per cent. Accordingly capacity utilisation should increase to 80 per cent by fiscal 2016-17 and 83 per cent by fiscal 2017-18 from the levels of 74 per cent utilisation in fiscal 2013-14,” the brokerage firm added.

Steel firms too see the present thrust translating into higher demand for steel in the country. A senior official at Tata Steel said, “The government’s policy initiatives should push steel demand growth to 7-9 per cent by fiscal 2015-16.”

“Around 15 million tonnes of steel capacity will get monetised over the next 12 months industry-wide and we expect demand to grow from now. The demand that we see coming from urban low-cost housing projects, urban infrastructure projects and large-scale infrastructure projects such as the Delhi Mumbai Industrial Corridor will lead to the capacity that has been added over the last couple of years being utilised fully,” the official added.