Sector wise consumption of cement (Infrastructure, Housing)

India’s cement industry has demonstrated healthy growth in the past decade, primarily driven b the
buoyancy in the country’s economy, which has resulted in increased investments in the two key end
user market of the cement industry- the infrastructure and residential real estate i.e. Housing sector.
Housing sector accounts for almost two-thirds of cement demand. Despite housing being the largest
end-user segment, we expect infrastructure to be the key growth driver for cement demand over the
next 5 years. Increased government focus will result in higher investments in the infrastructure
space. Within infrastructure, segments like roads will play a crucial role in increasing demand for
cement.

Key Issues

 What is the break-up of cement demand by end-user segments? 


 Which are the key end-user segments that will drive cement demand?

Sector wise break up

commercial real
13% estate
20%
4%
industrial

residential real
estate
63% infrastructure

Source: Crisil Research

Improved demand from residential real estate (housing)

During FY06-FY10, approximately 522 million tonnes of cement was used by the residential real
estate sector, which contributes 63.4% to the total domestic cement demand in the country. Given the
intense shortage of housing in the country, this segment has been the primary demand driver for
cement industry. Over the years, the demand for the residential real estate has only increased, fuelled
by increasing urbanization, rising income levels, decreasing household sizes, easy availability of
home loans and tax incentives for borrowers.

The total shortage in housing during the eleventh five-year plan (2007-2012), is expected to be 74
million units, the majority of which is expected to be generated by rural and below the poverty line
households, he government has launched various initiatives such as national rural employment
guarantee scheme (NREGS) and the Indira Awas Yojana to improve rural income, which may
increase the demand for rural housing in the country.

II. Increased focus on infrastructure development

India’s economic growth during the past few years has increased the need for quality infrastructure
facilities in the country. The government increased its total investment in the sector from US$24
billion (5% of the country’s GDP) in FY02 to US$83.5 billion (representing 7.2% of the country’s
GDP) in FY10. Its total investment target for the infrastructure sector during the eleventh five-year
plan is US$500 billion (9% of the country’s GDP) and 2.3 times more than investments during the
tenth Five year plan period. The bulk of the investments planned during the eleventh five-year plan
are likely to be absorbed by the power, road and highways, railway and port segments. Close to 21%
of the investments during the eleventh five year plan period are expected to be made to improve rural
infrastructure in the country.

Increased investments and construction activity in the infrastructure sector have resulted in a
consequent growth in the demand for cement. In FY06-FY10, approximately 166 million tonnes of
cement was used by the domestic infrastructure sector, which contributes 20% to the country’s total
demand for cement.

Over the next 5 years from 2012-13 to 2016-17, the infrastructure segment is projected to post a
robust CAGR of 14-16 per cent, primarily supported by the government's renewed thrust on
infrastructure development in the country. CRISIL Research expects this segment to account for
approximately 25 per cent of the total cement demand over the next 5 years.

Over the next 5 years, CRISIL Research expects demand for cement to grow at a robust
pace of around 8 per cent CAGR, primarily driven by infrastructure demand emanating from
urban areas along with independent housing projects in both urban and rural areas.

Infrastructure development to propel demand for cement

Over the next 5 years from 2012-13 to 2016-17, the infrastructure segment is projected to
post a robust CAGR of 14-16 per cent, primarily supported by the government's renewed
thrust on infrastructure development in the country. CRISIL Research expects this segment
to account for approximately 25 per cent of the total cement demand over the next 5 years.
Between 2007-08 and 2011-12, infrastructure accounted for around one-fifth of the total
cement demand in India. During this period, the segment registered a modest CAGR of
around 8-10 per cent.