New Delhi [India], November 26 (ANI): India's building products industry, including the wood panels, tiles, and bathware is poised for a cyclical recovery from the second half of FY26 after facing a two- to three-year slowdown.

According to a comprehensive sector report by Motilal Oswal Financial Services the demand, distorted by the post-pandemic surge in home renovations and record housing sales, softened through FY24 and FY25 as volumes normalized and inflation weighed on consumption. Despite this, the report maintain that the sector's long-term structural drivers remain intact.

The sector's fortunes are closely tied to real estate activity. A slowdown in launches and housing absorption in FY25, linked to state and central elections and approval delays, pushed unsold inventory to 14.4 months, the highest in five years. However, developers have deferred most pending launches to FY26.

'Low unsold inventory, strong fundamentals, and a pipeline of spillover launches create a strong setup for demand revival from FY26,' the report states.

The report further said that the average housing realizations in the top seven cities have risen at an 11% CAGR over FY21-25, signaling rising preference for premium homes, a trend favorable for branded building material companies.

Motilal Oswal Financial Services highlighted that the companies across the wood panel and tile segments have completed major capex cycles undertaken after the post-Covid demand surge.

With new facilities coming online and demand expected to rise, return ratios that were depressed due to high capital expenditure are projected to normalize over FY26-28, it added.

'India's Rs 550-billion wood panel industry remains structurally attractive, with MDF and particle board clocking the fastest growth. MDF alone grew at a 25% CAGR over FY18-24.'

Industry leaders expect a 'China-like' consumption shift as India crosses critical income thresholds, driving long-term demand for branded, engineered wood products. Recent BIS quality mandates on imports are also expected to curb low-quality inflows and support domestic pricing.

The report highlighted that India remains second-largest tiles producer globally, with the leading companies well positioned to benefit from any pickup in real estate momentum. EBITDA margins, which peaked in FY22, are expected to stabilize as input costs normalize, it said. (ANI)