For the first time in five years, average monthly domestic demand for cement is growing. Industry data shows that domestic markets are doing the heavy lifting this year as exports slowly trudge along constrained by border blocks and demand slowdown abroad. Overall offtake went up 11 percent boosted by renewed demand in local markets.
In recent years, headline growth in cement offtake has been shielded by mounting export orders, often masking the subdued demand in the domestic construction industry.
Since FY22, the economy has been struggling for stability and construction demand has fallen prey to weaker spending by households and public sector both. Cross-border and overseas shipments climbed to 20 percent by FY25 when average monthly domestic offtake was trailing its 7-year low.
The steadier pace of local dispatches now points to a gradual revival in construction activity. Public sector projects appear to be stabilising after years of stop-start funding worsened yet by cost overruns and operational delays.
Private construction and demand in real estate is also hyped to benefit from the policy support of the government in the form of the subsidized mortgage scheme for first time buyers. Though it is unclear how long this policy will last—the previous one ended abruptly as political realities changed—the scheme is expected to provide a nudge to housing demand. And nudge it will.
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Builders and real estate developers are also awaiting a comprehensive construction policy which could give impetus to stalled projects that have been facing funding constraints and weak investor confidence. Historically, construction packages have proved politically attractive. They are relatively straightforward to design, typically combining tax amnesties, temporary incentives, relaxed documentation thresholds or subsidised financing, and they tend to generate visible activity. Housing and real estate deliver quick optics where labor can be immediately hired boosting short-term employment, and allied sectors from steel to cement are primed to serve immediate demand. Investors come running.
But as this country has experienced many times before, suchincentive-driven booms are near-term, risky and they channelsavings into speculative real estate rather than more productive investment avenues. Construction is one of the few sectors where policy signalling can lift private capital to restart shelved projects and restore buyer confidence but this is done at the expense of structural changes in the economy that are harder to design and take that much longer to implement.
For cement producers, both the mortgage scheme and the upcoming construction package will strengthen domestic demand which will also culminate in improved current capacity utilization. With strong pricing power in domestic markets, a slump in exports rebalanced by local offtake, will work wonders for major and mid-tier capacity holders.
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