Why the cement sector could see a gold rush

Cement producers have gained from the post-covid surge in the housing market, which accounts for about 60% of the sector’s revenues. Among the cement companies whose shares are listed on stock exchanges, four of the top seven by market capitalization outperformed the BSE Sensex in the past year. Anticipating continued growth in housing demand, industry and infrastructure, the sector is rolling out large-scale capacity expansion, which could create excess capacity and depress prices. To counter that, bigger players are stepping up on consolidation to have better control over pricing.

In 2020, when the pandemic set in, the number of housing units sold in the top seven cities dropped 47% to 138,000. However, over the next three years, housing sales rose 70%, 54% and 30%, respectively, to reach 476,000 units in 2023.

That momentum has continued into 2024. In March alone, housing sales in the top seven cities increased 41% compared with March 2023, according to real estate portal PropTiger. Additionally, after the pandemic, there has been demand for larger houses in big cities, as customers accommodated working from home.

In the US, commercial real estate prices have crashed, in part due to the work-from-home phenomenon. In India, though, commercial real estate is picking up, too. It’s projected to grow 7-8% this year, as per real estate consultant Knight Frank.

During his recent visit to India, Blackstone chief operating officer Jonathan Gray said India was “probably one of the few markets in the world where we’ve seen rents grow and vacancies decline in the last 12 months”.