Budget 2024: Higher allocation for infra, housing bodes well for cement, construction companies

The government has proposed to increase allocation to Pradhan Mantri (PM) Awas Yojana scheme by 56.6% to Rs 84,700 crore compared with the estimated expenditure of Rs 54,100 crore in FY24. The primary aim of the scheme is to provide affordable housing to urban and rural poor. This is phase four of the scheme. Besides this scheme, the government has also increased allocation to Pradhan Mantri Gram Sadak Yojana by 11.7% to Rs 19,000 crore from Rs 17,000 crore in FY24.

This should boost the demand for cement in the coming quarters. It is estimated that more than 55% demand is driven by the real estate sector and the remaining by infrastructure projects. Given the government's higher focus on improving rural infrastructure through the affordable housing scheme and road works, geographically well-diversified cement makers such as Ultratech Cement, Ambuja Cements, Shree Cement and JK Cement are likely to see improved earnings growth in the coming quarters.

In the case of the infrastructure sector, the government proposed to allocate Rs 26,000 crore to construct highways in Bihar. It also proposed to provide a special package of Rs 15,000 crore to develop Andhra Pradesh. In addition, the government will identify 100 large cities in which it will award water supply, sewage treatment and solid waste management projects. The allocation to metro projects has been raised by 8% to Rs 24,900 crore from FY24. Analysts estimate that infrastructure companies such as NCC, IRB Infrastructure Developers and VA Tech Wabag would benefit.