The Hindu Business Line : Rural housing turns best bet for cement

New Delhi May 15 With increasing rural affluence, demand for cement for construction of houses in villages has gone up significantly over the last few years.

Rural housing, according to industry estimates, is expected to account for 50 per cent of the overall demand for cement during this year and beyond, replacing the traditional drivers for cement consumption - infrastructure and the urban housing segment.

"The cement industry is expecting around 50 per cent of the overall demand to come from the rural housing sector during the current year and beyond. Rural people, especially in most underdeveloped States, are increasingly replacing thatched mud hutments and switching over to pucca (brick and mortar) structures," the Cement Manufacturers' Association Vice-President and Shree Cements Managing Director, Mr H.M. Bangur, told Business Line.

While a marked increase in demand is being seen in the rural parts of predominantly underdeveloped States such as Bihar, Chhattisgarh and Uttar Pradesh, the hill States of Uttarakhand, Himachal Pradesh and the North-East are also seeing a spurt in demand, cement players said.

According to industry estimates, rural areas, till a few years ago, accounted for less than 23 per cent of the overall cement consumption. As per the 2001 Census figures, 11.651 million households were living in unserviceable temporary houses.

The Centre's latest estimates peg the estimated shortage of houses in rural areas around 15 million, as against an overall shortage of 22 million dwelling units in the rural and urban areas put together.

`Bharat Nirman'

The Centre, under its `Bharat Nirman' programme, expects over six million houses to be built in rural areas over the next four years. Besides, rural housing projects undertaken by about 15 States through their own capital subsidy or credit-cum-subsidy schemes have also resulted in rural housing coverage going up during the last few years. These States, including Tamil Nadu, Andhra Pradesh, Karnataka, Gujarat, Uttarakhand, Jharkhand, Sikkim, Meghalaya and Punjab, have together constructed about 27 lakh houses from 2001 to 2005, according to Planning Commission estimates.

According to Angel Broking estimates, over the last decade, Indian cement consumption grew at a compounded annual growth rate (CAGR) of a little over 8 per cent.

Since 2004, however, the domestic cement industry has clocked a CAGR of about 9.5 per cent, while growth in capacity addition has been much lower around 4.2 per cent CAGR, thus leading to significant improvement in capacity utilisation from about 80 per cent in 2003-04 to around 94 per cent in 2006-07.

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