Indian housing sector gets a boost from government stimulus measures

Aug 20, 2009. /Lesprom Network/. The beginning of August showed positive results for India’s realty sector, ITTO reported. The Ministry of Finance announced incentives to the building industry, extended tax breaks for realtors by three years and offered individual buyers of homes subsidies on the interest on loans up to Rp.1 million per year provided the purchase price of the home is not more than Rp.2 million. The government earmarked about Rp.10 billion for these provisions, which are expected to offer benefits to low and middle-income families. The Ministry also proposed an amendment to the Income Tax Act, whereby profits from housing projects approved by a local authority between 1 April 2007 and 31 March 2008 would be tax free if completed by 31 March 2012. The government has urged the builders to pass on the benefit to the consumers. There is an immense shortage of dwelling units in the country, as it is expected that about 47.4 million new dwelling units in rural areas and 26.5 million in urban areas will be needed by 2012. The measures announced by the government have been well-received by the construction industry and are expected to give a boost to wood working industries as well. Plywood alone accounts for 78% of the wood panel market in India, with the rest being composed of engineered panels such as MDF and particleboard. For the housing interiors industry, the Indian market is still dominated by plywood and blockboard. However, the trend is gradually changing with a growing market share for plywood and blockboard and an increasing share of particleboard and MDF. With the housing sector getting a boost, interior wood products comprised of decorative panels, wooden floorings and ready made furniture also gets a lift. India is a net importer of furniture. Small quantities of furniture are being exported representing not more than 0.25% of the global furniture industry. At present, the furniture sector is predominantly in the hands of unorganized small units. Fortunately, large corporate houses have started taking interest in production of modern furniture and prominent names like Godrej and Wipro have entered the furniture manufacturing business. The government has also extended tax breaks to industrial parks. Companies working from industrial parks can now plan for the long-term with tax breaks extended for two years, until 31 March 2011. Profits from development, operation and maintenance of industrial parks will continue to be tax-free. The Federation of Indian Chambers of Commerce and Industry have welcomed these measures that should give new momentum to the economic recovery currently under way. Corporate results for 2008-2009 have shown positive growth for most companies, including plywood and woodworking producers. The overwhelming consumer needs from urban and rural areas have sustained demand for tropical hardwoods like balau, merbau, and keruing from Malaysia and Myanmar and also teak from Myanmar, Tanzania, Nigeria, Ghana and Central American and South American countries. However, the Sabah state government in Malaysia has restricted log and sawn exports to India. This will make prices of logs suitable for the plywood industry more competitive. India substantially depends on imported hardwoods like gurjan and keruing for plywood faces. Other than face veneers for core material, Indian factories are able to get local hardwoods from agroforestry and plantations in the country. India’s forest cover stands at 23.6% of the total geographical area. Sustained efforts by the government and the local community are improving the forest cover. It is estimated that by the end of 2010 total forest cover could reach 25% and 30% by the end of 2012. The Indian government also has set a long-term target of increasing the country’s forest cover to 33%. Private and forest department tree planting is expanding.