The year 2022 saw a recovery for the building materials sector. The sector had a robust rebound due to the emphasis on infrastructure development and the rush to acquire real estate assets. The building materials industry recovered and moved in the direction of pre-covid levels. In 2022, the industry had a 10% rise. The sector is not showing any indications of slowing down as 2023 approaches; rather, it is headed in the direction of rapid expansion. Growth in the building materials industry is crucial for the economy as a whole since it employs more than 51 million people and accounts for roughly 9% of the nation’s GDP.
The country had 1,559 projects in the works totaling Rs 26.7 trillion ($352.3 billion), according to the Infrastructure and Project Monitoring Division of the Ministry of Statistics and Program Implementation (MoSPI), as of May 1, 2022. Even if some of those may be almost finished, the fact that so many large projects are still in the works shows the building materials sector has a lot of room for growth.
The expansion of residential and commercial real estate is another important aspect boosting the momentum. The number of new projects across the nation is predicted to significantly expand in 2023, which will raise the need for construction supplies. Even today’s millennials are starting to see a home as a need and a source of long-term stability. Even the market for luxury homes has seen favourable investments since the outbreak. This can need the use of strong, high-quality building materials. Additionally, the industry is benefiting from a growing awareness among individuals and corporations to embrace greener lifestyles. In 2023, the industry is anticipated to increase at a double-digit rate.
Ashwin Reddy, MD, Aparna Enterprises, added, “The govt’s vision to be a $5 trillion economy and the resultant investments in infrastructure is a key factor driving the growth of the sector. Be it the National Infrastructure Pipeline (NIP), or Pradhan Mantri Gati Shakti National Master Plan; the impact on the building material industry looks optimistic. From a sub-sector point of view, RMC, uPVC window and door systems, tiles, and manufactured sand are expected to be the biggest gainers as more and more customers are looking for alternatives that reduce the usage of natural resources. For instance, manufactured sand or Robo sand is an excellent alternate to river sand, and the adoption of this helps in reducing the mining of sand for construction. Similarly, uPVC window and door system is a good alternative for wooden windows and doors.”
The market opportunity for the sector is enormous, but it will need a concerted effort from all the stakeholders, including the government, for it to be realised. The Indian RMC market is now valued at $25 billion and is anticipated to expand by an average of more than 15% over the following four years. Not far behind is uPVC, the market for which is anticipated to grow by 11% annually and reach $7.3 billion by 2025.
Inflation is one of the important issues that will need a prompt response. The cost of raw materials is increasing as a result of state government taxes and supply chain disruptions. Inflation results in rising labour and raw material costs. Once it is in check, the expenses may be brought down to a level that is affordable for the participants that are active in the market. The government may consider lowering interest rates if the inflation returns to normal or is brought under control because the segment is also severely impacted by the rise in interest rates. In the interim, interest subsidies may be given to the producers of critical building materials to combat the anomalous rise in manufacturing costs. Thirdly, a persistent problem is a shortage of competent labour. In 2022, the construction industry saw an 85% lack of competent workers, according to Statista. Therefore, a foolproof strategy is needed to prepare the workforce for future demands.
Last but not least, the many permissions needed for each infrastructure or real estate project increased the difficulties already faced by category players.
The Indian government has made several interventions in the building materials business during the past two to three years, but there are still many issues that need to be resolved for a brighter future.