Prime minister Narendra Modi’s ambitious Housing for All (HFA) project is likely to benefit sectors providing critical inputs to the construction industry like, cement and iron & steel, India Ratings & Research (Ind-Ra) has said in its latest report. However, much would depend on ability of domestic industry to meet the huge incremental demand for cement and steel due to be generated by HFA project, it added.
Under the HFA scheme, the central government will provide a grant for slum households (to the state), central assistance (given directly to households) and interest subvention. The overall fiscal impact is estimated to be 0.16% of GDP in FY16. The construction sector has the highest employment multiplier, and HFA has the potential to increase employment by 0.16 million man years annually. The impact will be felt across all states; however, Uttar Pradesh, Maharashtra and West Bengal are likely to be the major beneficiaries.
However, the report has also raised doubts on whether domestic industry will be able to meet the large incremental demand for cement and steel arising out of the HFA project.
“While the cement and steel sectors will get a boost from HFA; these sectors may also act as a constraint in realising HFA by 2022,” Ind-Ra said in the report. Additional annual steel demand, mainly bars and rods for HFA is estimated to be 24.6% of FY14 production levels. Similarly, additional cement demand is estimated to be 13.2% of FY15 cement production. “Clearly, the incremental steel and cement demand is huge. There are other execution challenges. While the programme has been announced, not much has happened on the ground,” Ind-Ra pointed out. It also added that it expects time overruns in HFA programme to lead to cost overruns.