Improvement in demand for several ferrous and non-ferrous metals largely depends on the infrastructural activities. Anuj Puri, Chairman of ANAROCK Property Consultants in an exclusive interview with Davis Index said that we will see a bulk of the construction activity at a faster pace in the last quarter of CY2020. He revealed that site-visit-to-sale conversion rate is improving now in major cities.
1) How has COVID-19 hurt infrastructure sector’s growth?
Construction halt, labour shortage and revocation of toll collection were some of the major challenges faced by the infrastructure sector due to the lockdown since March. The focus of the government shifted towards building healthcare infrastructure because of the COVID-19 pandemic. Consequently, the infra sector suffered a severe blow. Even now, post a staggered easing of lockdown rules, major infrastructure work across the country haven’t resumed usual pace.
2) Any government initiatives/stimulus packages that could help in the recovery of the sector?
The government has always taken a multi-modal approach towards the development of infrastructure. Allocation of Rs100lakh crore (Rs100tn or $1.33trillion) worth investments towards infrastructure projects in late 2019 for a five-year period was in addition to the Rs51 trillion already spent since 2014. Thus, more than funds the government needs to ensure proper and timely implementation. Many of the infra projects were already delayed even before the pandemic and work on these needs to speed up immensely. The government will need to address issues like labourers issue and working capital.
3) What are the major hurdles that the construction sector could be facing going ahead?
Labour shortage and liquidity crunch are the major hurdles for the construction sector presently. Maintaining the supply-chain of raw materials during the last few months was another challenge but that issue is gradually getting ironed out across many States.
4) Demand for steel, zinc and aluminium, amongst other metals has also dipped owing to infrastructure projects being stalled. Would demand from infrastructure improve demand for metals in Q3 and Q4?
The upcoming quarters are likely to see activities pick some momentum. This will certainly increase demand for basic raw materials such as steel and zinc.
5) What is your outlook for construction sector for FY2021 and what according to you could significantly boost infra growth?
In the construction sector, the pandemic created all round disruptions in overseas, regional and domestic supply chain along with issues of availability of labour, machinery and capital. Even though some of these issues continue to disrupt normal functioning, I think we will see a bulk of the construction activity at a faster pace in the last quarter of CY2020.
6) Has consumer sentiment improved post lockdown with affordable housing schemes and discounted housing rates?
India’s residential real estate segment is witnessing a decisive return of serious enquiries, which are now at 50pc of pre-COVID-19 levels in the top cities. Recovery is fastest in Bengaluru, where current enquiries have reached 70pc of the January-February period, followed by Gurugram with nearly 65pc.
Moreover, the site-visit-to-closure conversion rate has increased considerably as only serious buyers are venturing out, with casual window shoppers remaining dormant at the moment. Hyderabad now sees an average of 15pc site visits converting to sales, against 8pc in the pre-COVID-19 period. Gurugram, with just 4-5pc conversions earlier, is now clocking in at 8-10pc. Other cities have reported similar trends.