The cement industry is poised for impressive growth this fiscal year, with demand expected to rise between 6.5% and 7.5%, according to insights from Crisil Intelligence. This anticipated surge is largely attributed to a 10% increase in budget allocations for essential infrastructure projects and the expectation of a robust monsoon, which is likely to enhance agricultural profitability and subsequently boost rural housing needs.

Factors Influencing Cement Demand Growth

In fiscal 2025, the demand for cement was relatively subdued, hovering between 4.5% and 5.5%. Several factors contributed to this slow start, including:

• General elections impacting project timelines.
• A well-distributed monsoon that hindered construction activities.
• A high comparison base from the previous three fiscals.

Additionally, lackluster spending from state governments in the first half of the year further delayed project execution, while a sluggish real estate market dampened urban housing demand.

Infrastructure as a Key Driver

The analysis emphasizes that infrastructure will continue to be a significant driver of demand in the current fiscal year. Notably, infrastructure projects account for 29% to 30% of domestic cement consumption. Within this sector, road construction remains the largest contributor, followed closely by railways, irrigation, and urban development.

Sehul Bhatt, Director at Crisil Intelligence, pointed out that 12 states, responsible for 63% to 65% of India’s cement demand, have announced an 11% increase in total budget allocations for this fiscal. He noted, “The government’s focus on developing specialized rail corridors for sectors like energy and mining, coupled with initiatives aimed at boosting tourism, is set to further enhance demand. This renewed investment is expected to catalyze a growth rate of 7.5% to 8.5% within the infrastructure sector.”

Rural Housing Demand on the Rise

Rural housing is expected to maintain its dominance in cement consumption, projected at 32% to 34%. A favorable monsoon season is anticipated to raise agricultural incomes, thus increasing housing demand. Initiatives like the Pradhan Mantri Gram Sadak Yojana (PMGSY) and MGNREGA are expected to sustain consumption through higher budget allocations. The execution pace under the Pradhan Mantri Awas Yojana – Gramin is set to accelerate, with an increase in approvals and ongoing projects. Crisil forecasts that average rural wages, having risen by around 25% year-on-year in fiscal 2025, will remain robust this year.

Urban Housing Sector Gaining Momentum

The urban housing market, which faced challenges in fiscal 2025 due to a sluggish real estate environment, is expected to regain its footing. This recovery will be supported by a low base effect, recent interest rate cuts, and an enhanced execution pace under the Pradhan Mantri Awas Yojana – Urban. The allocation for this scheme has surged by 45% in the 2025-26 Union Budget.

Industrial and Commercial Segments Show Steady Growth

The industrial and commercial sectors are projected to experience steady growth this fiscal year, driven by demand from commercial real estate and warehousing. This segment accounts for 13% to 15% of the total cement demand.

After three consecutive years of robust growth, this segment experienced a slowdown in fiscal 2025, primarily due to a dip in private capital expenditure. Sachidanand Choubey, Associate Director at Crisil Intelligence, remarked, “An uptick in demand across various sectors is expected, fueled by increased capital expenditure for infrastructure and housing ministries. This growth is likely to initiate a price rise in fiscal 2026, following a two-year period of stability. While market competition remains intense, we anticipate a modest price increase of 2% to 4% as companies strive to improve their revenue streams.”

The outlook for the cement sector appears promising, with key growth drivers in place to support robust demand in the coming fiscal year. As infrastructure projects ramp up and rural housing needs grow, cement consumption is set to rise, signaling a revitalization in the industry.