FM Sitharaman pushes MoHUA for full capex utilisation; cement, housing finance stocks to benefit

Union finance minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman chaired a review meeting to assess the budgeted capital expenditure of the Ministry of Housing and Urban Affairs on September 20. The Finance Minister urged the officials to ensure that the capex target for the current fiscal year is fully met and that the budgeted allocation of Rs 28,628 crore is completely utilised.

The Finance Minister's key focus during the meeting was the Pradhan Mantri Awas Yojana (Urban) scheme, which plays a crucial role in providing affordable housing.

In a post on the social media platform X, formerly known as Twitter, the Finance Ministry wrote, "FM Sitharaman underscored the importance of accelerating progress under PMAY(U) to meet the housing needs of urban India. [She] also emphasised the importance of urban transport, urging officials to meet capex targets allocated for Metro Rail and the Regional Rapid Transit System (RRTS)."

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In the Union Budget 2024, the Centre left the allocation towards capital expenditure remained unchanged from the interim budget’s outlay of Rs 11.1 lakh crore, which accounts for 3.4 percent of GDP.

There are many stocks that could see benefits from the thrust on building affordable housing:

On 9 Aug, the government approved PMAY-U 2.0, under which central assistance of Rs 2.3 lakh crore would be provided to construct/purchase/rent one crore houses for urban poor and middle-class families at an affordable cost over five years.

For this, Nomura suggested that affordable housing finance companies shall benefit, as a result of their higher share of lower income group and economically weaker section (EWS) in the borrower mix. The Japanese brokerage is bullish on Aadhar Housing Finance, but other housing finance companies such as LIC Housing Finance, Aavas Financiers and Home First Finance could see benefits.

The PMAY-U 2.0 could create cement demand of 179 million tonnes by FY30E compared to 147 million tonnes in the previous five years, leading to a 120 bps positive impact on five-year demand CAGR, said Elara Securities.

Cement firms adding capacity, such as UltraTech Cement, Ambuja Cements, and Shree Cement, are likely to be key beneficiaries as the increased capex outlay to build houses and roads could help cement majors ramp up volumes.

The government has maintained a capex target of Rs 11.1 lakh crore for FY25 and the companies such as L&T  will be a key beneficiary of spending across areas such as urban transformation. Another key beneficiary of improved urban transportation is Dilip Buildcon, which is for its involvement in urban development projects, including roads and metro systems.

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