Govt sanctions around 31 lakh homes under PMAY The government has sanctioned 30.76 lakh houses since the launch of Pradhan Mantri Awas Yojana (Urban) to fulfill its ambitious scheme of Housing for All by 2022, according to housing minister Hardeep Singh Puri. Around 15.65 lakh houses have been grounded and are at various stages of construction and about 4.13 lakh houses have been constructed since the launch of the mission, informed Puri. The minister was speaking at the launch of National Workshop on Accelerating Implementation of Urban Missions: PMAY(Urban) and Swachh Bharat mission(Urban).
Pegging the housing demand at around 12 million unites, the minister said the government is actively pursuing on reforms like stamp duty exemption and single window clearance. According to Puri, the in-situ slum rehabilitation (ISSR) scheme under PMAY(U) has had a few challenges in its implementation due to land related issues, financing models, selection of private developer, beneficiary participation and policy concerns of the states. However, the minister urged the states to adopt a slum-free approach and comprehensively develop their cities with focus on slum redevelopment taking complete advantage of the ISSR scheme.
Puri also called on the states to ensure better outreach for the credit-linked subsidy scheme (CLSS) and focus on convergence between the banks, private sector and home buyers. Speaking on the progress in the affordable housing in partnership (AHP) scheme, the minister said more focus should be on catering to the housing demand emerging from the economically weaker section (EWS) of home buyers with no land ownership.
The minister also urged the private builders to come forward and participate in the public private partnership models for affordable housing.
The private sector participation will also enhance access to financing and capital markets, as well as reduce costs through gains in construction, operations and time-bound delivery of houses, he said.
The government has in the past one year introduced a slew of reforms to uplift the housing sector, namely infrastructure status to affordable housing, direct tax benefits under Section 80-IBA of the Income-Tax Act, relaxation in foreign direct investment (FDI) and external commercial borrowing (ECB) proposals, reduction in holding period for long-term capital gain benefits and standardised usage of carpet area in calculating housing sizes. The government launched its flagship Housing for All by 2022 mission on June 25, 2015, which is divided into two schemes namely PMAY(Urban) and PMAY(Rural).
Binani sale attracts multinationals interest
Binani Cement has attracted interest of as many as 15 bidders, say senior officials at the company, including CRH, Lafarge and Heidelberg Cement as well as local players India Cement, Orient Cement, Ramco Cement, Shree Cement, UltraTech and Piramals. The Bank of Baroda referred the Binani Cement, a subsidiary of Binani Industries, to the National Company Law Tribunal in July after it failed to repay a Rs 970 million loan. Bidders for the company will provide a binding bid with a detailed resolution plan that would involve acquiring equity and recasting the debt by 22 December. Binani has a manufacturing capacity of 11.25 MT with integrated plants in India and China, and grinding units in Dubai, UAE.
Industrial production growth slows to 4.7%
Industrial production denoted by eight core sectors grew at a slower pace of 4.7 per cent in October, due to subdued growth of cement, steel and refinery segments. The eight infrastructure sectors – coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity – had clocked a growth of 7.1 per cent in October last year. The eight core industries constitute 40.27 per cent of weight of items in the index of industrial production (IIP). Cumulatively, the growth in the eight core sectors slowed down to 3.5 per cent as against 5.6 per cent in the comparable period of the last fiscal.
Electricity production continued its slow growth of September 2017. Contraction in cement output and expansion of steel output gives contradictory trend of infrastructure sector. April-October 2017 capital expenditure growth by the centre stood at 30.3 per cent, supported by steel production, while cement production defies the trend, points Devendra Kumar Pant, Chief Economist, India Ratings & Research. According data released by the Central Statistics Office, the cement production contracted by 2.7 per cent as against an expansion of 6.2 per cent in October 2016.
The output growth in the steel segment too slowed to 8.4 per cent in the last month compared to 17.4 per cent same period last year. Slowdown in refinery output growth at 7.5 per cent in October this year is less than 12.6 per cent expansion in the same month last year.
Meanwhile, the coal segment has shown significant improvement as it expanded by 3.90 per cent. It witnessed a decline of 1.9 per cent in the year-ago period. The fertiliser sector grew by 3 per cent as against 0.7 per cent in the year-ago period. Crude oil production and natural gas output have shown improvement.
Demand recovery at the mercy of govt spending
Most cement makers reported decent volume growth in the September quarter. This was led by factors such as a favourable base, a ramp-up of capacities and market share gains. Among pan-India cement makers, ACC Ltd and Ambuja Cements Ltd saw 18 per cent and 12 per cent growth in sales volumes, respectively. UltraTech Ltd’s volume growth of 18 per cent was on the back of a merger of Jaiprakash Associates Ltd’s cement capacities. Similarly, among regional firms, south-based India Cements Ltd’s double-digit volume growth, too, was driven by the merger of Trinetra Cement Ltd and Trishul Concrete Products Ltd.
On the other hand, volume growth in some markets like Tamil Nadu and Gujarat were impacted by lower sand availability and floods, respectively. Realisations were much better than anticipated despite September being a seasonally weak quarter. However, an increase in realisations was not adequate to offset the spike in fuel and power costs due to elevated petroleum coke (petcoke) prices.
Petcoke is a key input material for cement producers. Petcoke prices began to harden after August when Hurricane Harvey hit the US. Operations of oil and gas refineries were disrupted by the hurricane that led to production shutdowns, causing a shortage of the fuel. Many Indian firms rely on imported petcoke. Price of imported petroleum coke is currently hovering at $105.
Apart from that, some firms saw higher raw material cost since slag prices jumped. According to analysts, prices of slag have risen 65 per cent year-on-year (y-o-y). Freight costs, too, rose for most firms due to increased diesel prices. As a result, profitability of cement makers declined from the peak of June 2018 quarter.
The second half of the fiscal is comparatively better for the sector in terms of demand. However, the urban housing segment has slowed after the Implementation of the Real Estate (Regulation and Development) Act. So, the sector is reliant on government spending on schemes such as Housing for All, Clean India Mission and other infrastructure projects.
The sand mining issue that affected demand in certain pockets may get sorted soon. Better demand is likely to translate into further improvement in realisations. While volumes and realisations may head northwards, cement makers are unlikely to see much relief on the cost front, especially of power and fuel. The fear is that if the ongoing rally in global crude oil prices continues, it would lead to a further hardening of petcoke prices, impacting margins. Meanwhile, many large and midcap cement stocks continue to trade at expensive valuations. Given the aforementioned concerns, valuations need to correct.
GDP growth rate rises in Sept quarter
The country’s economic growth recovered to more than 6 per cent in the July-September quarter, backed by strong manufacturing, allaying doubts about disruptions caused by the goods and services tax (GST). This was a break with five quarters of declining trends in growth, but India remained behind China in economic expansion. It was de-stocking in the first quarter of 2017-18 due to pre-GST jitters that had pulled down gross domestic product (GDP) growth to a more than three-year low.
GDP rose 6.3 per cent in the quarter ended September, higher than the 5.7 per cent in the previous one on improved investment and steady demand, the data from the Central Statistics Office showed.
Construction equipment cos breathe easy after GST cut
Reduction in the GST on mining and construction equipment to 18 per cent from 28 per cent will help support infrastructure development across segments, said Anand Sundaresan, Vice-Chairman and MD of concrete pump manufacturer Schwing Stetter (India), and former President, Indian Construction Equipment Manufacturers’ Association. It is a big relief for most of the industry. But for 15 per cent of the products, the rate continues to be 28 per cent. ?We will seek reduction for those products too.? Pre-GST duty was under 20 per cent, he said.
Sundaresan told that sales declined 35 per cent in July due to GST implementation. However, things returned to normal and the overall growth was not affected as the industry grew 19 per cent in Q1 and 22 per cent in Q2. And the industry will sustain this in the current fiscal. So far, only road construction has driven growth, but the Railways has also started to offer some opportunities.
‘Leasing will become cheaper post-GST. Earlier, they had excise duty and sales tax, and on top of that service tax . The total rate worked out to 30-32 per cent. Now, leasing companies will charge only 18 per cent GST. So, it will benefit them a lot.’ Sundaresan felt that till full clarity is achieved on GST, the government should allow the industry to correct its mistakes, instead of penalising. Referring to EXCON 2017, the 9th International Construction Equipment and Construction Technology Trade Fair, to be held from December 12 to 16 in Bengaluru, Sundaresan, who is a member of the event committee, said this year’s edition will be one of the largest fairs with a display area of 2,60,000 sq m.
Affordable housing continues to see strong demand
Affordable housing continues to be much in demand accounting for 19 per cent of the overall sales in Q2 compared to 17 per cent in the previous quarter, according to data by real estate data analytics firm Liases Foras. The Mumbai Metropolitan Region (MMR) accounted for highest sales at 28 per cent with 3,388 units, followed by Ahmedabad at 24 per cent with 2,903 units during the quarter.
Sales across eight Tier-I cities decreased marginally from 64,881 units in the previous quarter to 64,781 units in the current quarter. Chennai and Kolkata witnessed a steep decline in quarter-on-quarter sales at 13 per cent and 8 per cent respectively. Sales in Hyderabad were up 11 per cent. Sales in the cost bracket of Rs 1- 2 crore and Rs. 50 lakh – Rs. 1 crore decreased 8 per cent and 5 per cent respectively. The Rs 25-50 lakh segment accounted for 36 per cent of total sales. Unsold stock in Tier-I cities declined 1 per cent. Hyderabad and NCR witnessed 5 per cent decline followed by Ahmedabad and Bengaluru at 3 per cent. Kolkata and Chennai recorded an increase in unsold stock at seven per cent and six per cent respectively. Weighted average price across Tier-I cities increased marginally by 1 per cent but Chennai alone witnessed a decline in price of 1 per cent. Prices across other cites either witnessed no change or increased marginally by one per cent.
‘Months inventory across Tier-I cities remained constant at 44. Maximum increase was seen in Chennai at 22 per cent where the number of months increased from 58 to 71, followed by Kolkata with a 16 per cent increase from 44 to 51. Hyderabad witnessed the maximum decrease of 12 per cent in months inventory. This decline is attributed to an increase in sales and a lower supply of new units in the city, said Pankaj Kapoor, MD, Liases Foras.
Amit Ruparel, MD, Ruparel Realty, said, ‘While 2017 was the year of consolidation, the sector’s growth prospects for 2018 seem to be brighter, as the impact of RERA and GST would continue to unfold in 2018.
With the overall affordable housing segment receiving an industry status in the Budget and support from the Centre under the newly introduced regulation in the Pradhan Mantri Awas Yojana, the sector will witness a steady demand in the coming year. Moreover, from the investor’s perspective, affordable apartments are easier and more profitable to sell or even to put on rent, assuring decent return of investment.’
States to adopt new technologies for building affordable homes
The government has directed states and Union territories to adopt 16 alternate innovative technologies for fast and better construction of homes under the affordable housing in partnership (AHP) and in-situ slum rehabilitation (ISSR) schemes. It also proposes to launch the global housing construction technology challenge (GHCTC) to globally identify best technologies which are suitable for mass housing.
‘States/UTs shall adopt 16 alternate innovative modern, sustainable, green and disaster resistant technologies that have been identified…,’ the Housing Ministry said in a release. Introducing seven strategies to accelerate implementation of the Pradhan Mantri Awas Yojna (Urban), the ministry asked states and Union territories to implement necessary land reforms to ensure that beneficiaries have valid land document, and put in place a single-window time bound clearance system for layout approvals and building permissions. It has also asked states to prepare a land database to ensure availability of land for affordable housing.
‘States/UTs may converge their states policies with new 8 PPP models and utilise suitably to promote affordable housing,? the ministry said. While asking states to provide incentives like additional floor area ratio (FAR) and transferable development rights (TDR) to make the ISSR projects viable, the ministry also asked them to provide rental accommodation to the slum dwellers while resettling them in ISSR projects. It has also directed states to share their respective road map with respect to slum redevelopment projects under ISSR.
To promote its flagship credit linked subsidy scheme (CLSS), the government has asked states to target teachers, Anganwadi workers, Para?military forces, state police departments, etc. The suggestions were derived from a day-long National Workshop on Accelerating Implementation of Urban Missions: PMAY(Urban) and Swachh Bharat mission(Urban) that was conducted here.
The government launched its flagship’Housing for All by 2022′ mission on June 25, 2015, which is divided into two schemes namely PMAY(Urban) and PMAY(Rural). It has so far sanctioned 30.81 lakh houses under PMAY(Urban), in which around 15.65 lakh houses have been grounded and are at various stages of construction and about 4.13 lakh houses have been constructed since the launch of the mission.
