The cement sector is in focus ahead of Monsoon. Prediction of weak rainfall, Middle East conflict are expected to be key challeges but analysts believe that cement firms are expected to see a robust Q4FY26. Analysts pointed out that the cement demand is being driven by multiple factors including strong infrastructure spending by the government and rising housing demand across Tier 2/3 cities.

In fact one of the key cement players, UltraTech Cement recorded a strong   Q4 revenue growth of 18%. Most market observers see demand offsetting the near-term cost pressure. 

Infrastructure push and housing demand drive growth

Government-led infrastructure spending remains the biggest demand driver for the cement sector. Investments in roads, railways, and urban infrastructure continue to support consumption.

Manik Jain, Equity Research Associate at DRChoksey Finserv Deven Choksey said that long-term demand outlook remains intact, with cement demand expected to grow at a compound annual rate of 6–7% between FY26 and FY30.  

The capital expenditure is pegged higher at Rs 12.2 lakh crore in FY27 Budget estimates. Allocations include around Rs 2.87 lakh crore for roads and Rs 2.55 lakh crore for railways. Housing also remains a priority, with over Rs 54,000 crore earmarked for PMAY-G, while PMAY-U is expected to see a sharp scale-up in FY27. So, Housing demand, under schemes such as PMAY, along with private real estate activity, also contributes significantly to overall cement demand.

According to Jain,  the infrastructure spending is projected to increase to nearly 6.5% of GDP by FY29 from about 5.3% in FY24 . 

“Infra spend is expected to rise from approximately 5.3% of GDP (FY24) to approximately 6.5% by FY29, supporting a 6–7% long- term cement demand CAGR (FY26–30),” DRChoksey Finserv noted.

Price hikes to offset cost pressures in cement sector: Kotak 

Demand growth is expected to offset the fuel cost impact. Arun Agarwal, VP – Fundamental Research at Kotak Securities, also expects price hikes to offset cost pressures from rising fuel and packaging expenses. “We expect cement demand to have grown approximately 8% in FY26 and to rise 7% in FY27E, provided fiscal conditions stabilize and Middle East tensions ease. We estimate demand growth will keep industry utilisation levels rangebound, despite supply additions,” Agarwal said.

“Middle East conflict has pushed up fuel and packaging expenses. However, we expect recent pan-India price hikes to largely offset the impact of cost inflation in the near term,” he added.

GST cut to support demand

The DRChoksey Finserv further stated that the reduction in GST on cement from 28% to 18% in September 2025 has improved affordability. This move is expected to lower retail prices and act as a structural demand catalyst for the sector.

While Government push in infrastructure is continuing the demand for the cement but the near term outlook is still facing some risks.

Cement sector may face pressure in Q2FY27: Elara Capital 

Elara Capital believes that the cement sector will face pressure in Q2FY27. Why? Because they believe the seasonally weak quarter will see no or limited price hike because the prices have already seen a hike in the month of April.

Along with this cost structures will remain high due to elevated petroleum coke prices, driven by global supply disruptions and domestic refinery maintenance. “Without further aggressive pricing action, the industry faces a challenging environment to defend profitability in the coming quarters,” Elara Capital noted.

UltraTech Cement to see double-digit growth, margin expansion by FY28: Axis

“Cement demand in its core markets is expected to remain robust, underpinned by higher infrastructure spending, growth in affordable and rural housing, rising private capex, and a healthy real estate cycle,” Axis Securities said. It added that market leader UltraTech Cement is expected to see sustained double-digit volume growth during FY27–28, driven by these factors, along with accelerating market consolidation and capacity expansion.

“We estimate EBITDA margins to expand to ~21% by FY28, supported by operating leverage from higher volumes, improved realisations, and sustained cost-optimisation initiatives,” Axis Securities added.

Conclusion

Despite near-term cost pressures triggered by elevated fuel and packaging expenses amid Middle East tensions, the cement sector’s structural growth story remains firmly intact. Strong government-led infrastructure spending, rising housing demand—particularly in Tier 2 and Tier 3 cities—and supportive policy measures like the GST cut are underpinning robust demand visibility.