Faced with a slowdown in the urban centres, leading cement firms are increasing their focus on rural markets. A relatively stable farm economy backed by higher government support price for crops like wheat and paddy. It is complemented by the Rs 71,000 crore farm-loan waiver is luring companies like ACC and Ambuja to strengthen their presence in rural India.
Backed by a favourable weather and handsome market prices, farmers in the country harvested record crops this year. The prospects of new rabi crop (to be harvested in April) are also favourable.
According to industry estimates, rural India accounts for about one-third of the cement sales in the country. The country has a capacity of produce 206 million tonnes of cement annually and consumption is growing around 6 per cent.
“The agricultural growth is good and we expect a higher growth from rural areas," said H M Bangur, president of the Cement Manufacturers' Association and managing director, Shree Cements. Urban cement sales have been sluggish owing to a slowdown in construction. Real estate companies are faced with liquidity crunch since high interest rates are discouraging buyers.
“In future, rural India is going to see an increase in spending owing to factors like better agricultural growth and impact of loan waiver. We have so far concentrated on cities, towns and semi-urban areas. However, we now need to focus on rural areas since this an area where the per capita consumption can be sharply increased,” said Sumit Banerjee, managing director, ACC, the country's biggest cement producer.
Delhi-based research body National Council of Applied Economic Research (NCAER) has done a study on prospects for rural housing in India. The study was commissioned by Holcim, the holding company of ACC and Ambuja Cements. In January, ACC will analyse the key findings of the study to come out with a strategy for rural market.
“About 70 per cent of our population stays in villages. This population is largely dependent on agriculture and there will be demand for housing if agricultural growth is high,” said A L Kapur, managing director of Ambuja Cements.