Building materials industry to grow by 10% in 2019 backed by massive infra developments

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By Ashwin Reddy, Managing Director, Aparna Enterprises Ltd

The building material industry is the second largest employer in the country after agriculture, providing a significant contribution to the nation’s economy and employing a large number of people. Currently, it is valued at approximately $126 billion and is accounting for around 8% of India’s GDP. Industry reports forecast that the bourgeoning Indian construction/building material industry is expected to record a CAGR of 15.7% y-o-y to reach US$ 738.5 billion by 2022. The key areas of expected growth are social infrastructure, educational institutions, hospitals, government accommodation, defense infrastructure and water resources. M&A deals worth US$ 5.4 billion in 2017, private equity and venture capital investments worth US$ 3.9 billion with 29 deals during the first half of 2018 and AIIB’s announcement to invest US$ 200 million into National Investment & Infrastructure Fund are some of the key developments which underline the significant interest of international investors in the Indian infrastructure space.

Infrastructure development is believed to be the backbone for the overall economic development of a country. The launch of numerous ambitious building schemes in the recent past by the Indian government including industrial parks and corridors, technological hubs are known as smart cities, logistics network, Housing for All 2022 scheme etc are strong contributing agents to the growth of the industry. As all these initiatives will need supplies of cement, ceramics, steel, windows and other construction materials, it makes the future of the building material industry promising and lucrative.

2018 has been a remarkable year for the sector with significant advances. In the last union budget, the government has given a massive push to infrastructure development by allocating US$ 92.22 billion for the sector and bringing affordable housing under the ambit of ‘Infrastructure’. Budgetary allocation of US$ 18.69 billion for the road sector, US$ 10.97 billion for development of National Highways, US$ 22.86 billion for railways, US$2.47 billion towards Sahaj Bijli Har Ghar Yojana, US$ 648.75 billion to increase capacity of Green Energy Corridor Project, US$ 69.86 million for the upgradation of state government medical colleges (PG), US$ 122.66 million for development of government medical colleges and government health institutions, allocation of US$ 1.55 billion to boost telecom infrastructure, commissioning of US$ 31.81 billion for smart cities development and construction of additional 150,000 affordable houses under PMAY showcases the clear vision of the country and the opportunities for the sector ahead. Most of the prominent investments have been in states of Andhra Pradesh, Telangana, Maharashtra, Gujarat, Goa, Union Territories of Daman & Diu and Dadra & Nagar Haveli.

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