Amidst the cascading price rises in cement across India, the construction industry is bracing for a rough patch that may derail the momentum of affordable housing and broader infrastructural projects. In regions like North India, Central, and East India, and in the Western corridor, officials have announced price increases ranging from Rs 10 to Rs 40 per bag of cement. This upward trend comes after a sustained five-month lull in cement costs attributed to a dip in demand.
Consequently, property developers are ringing the alarm bells about the weakened appetite for modest housing. “The affordable housing sector is already in a slump, and the current climb in cement prices is poised to push the costs beyond reach for many,” remarks Niranjan Hiranandani, Chairman of the National Real Estate Development Council. There is a shared consensus among industry experts that this price swell could lead to costlier bids for future infrastructure works.
The construction sector’s overarching sentiment echoes the concerns of jacked-up cement prices affecting not only the demand for affordable homes but also the overall consumer sentiment and large-scale projects. Jatin Shah, the Chief Technical Officer of Project Management and MD at Technical Advisory Services for Colliers India, states that “This surge will burden retail consumers, large developments, and infrastructural undertakings. The increase can be traced back to the inflated expenses for raw materials, power, freight, and a resurgent demand for cement within the market.”
Developers are now facing the prospect of revising their financial strategies as every increment of Rs 10 per bag of cement is likely to bolster the cost of construction by about Rs 4 to Rs 5. This predicament forces a meticulous revaluation of project estimations and potential sale prices. India, being the world’s second-largest cement producer—accounting for over 8% of the global installed capacity—is not shielded from the implications of these price hikes.
Crisil Ratings highlights that the Indian cement industry has expanded by nearly 80 million tonnes (MT) capacity in FY24, its most significant growth spurt in a decade. The country’s cement consumption, fuelled by augmented investment in housing and infrastructure, is anticipated to reach 450.78 million tonnes by FY27’s end. Undeniably, the ripple effects of this ascent in prices are anticipated to touch every corner of the construction sector, spanning from individual consumers to mega projects and infrastructural initiatives.
The sudden leap in cement prices, a linchpin material for building, is a telltale sign of the broader challenges brewing within the industry against the backdrop of shifting market forces. Builders and industry players must now deliberate on the longevity and feasibility of ongoing and forthcoming projects amid these cost fluctuations.
Several determinants are at play in the recent inflation of cement costs, specifically the uptick in the prices of indispensable inputs—raw materials, energy, and logistics—amidstrenewed demand. These components are essential for firms across the construction sector who must now adapt their operative models to maintain the delicate balance between profitability and project completion.
The construction industry’s landscape is experiencing a paradigm shift as it grapples with these newfound economical hurdles. It remains to be seen how builders and stakeholders will adjust their sails to navigate these turbulent financial waters while safeguarding the sustainability of their projects. With India being a global leader in cement production, the effects of these price dynamics will undeniably be felt on an international scale. It is a testing time for the sector as it seeks to uphold progress within the affordable housing domain and preserve the momentum of infrastructural development.
