Andhra Pradesh to Revise Land Registration Values; Construction Sector Faces Slower Growth in FY25

The Andhra Pradesh government, led by Minister of Revenue Satya Prasad, will increase land registration values by fifteen percent to twenty percent from June 1, 2025. A consolidated report of the amendments will be submitted to him by January 15, 2025.

A detailed report of the amendments will be submitted to him by January 15, 2025. This announcement is expected to have profoundly affected the real estate and construction sectors of the state.

Meanwhile, construction growth in India is set to slow down starting from 2024-25. As per a report released by ICRA, construction companies will see an 8%-10% growth in revenues during FY25, compared to a much stronger growth range of 12%-15% in earlier years.

The slowdown can be attributed to several causes: the Model Code of Conduct in Q1 FY25, extended monsoon, and the change to milestone-based billing in Q2 FY25. This has, in particular, affected road construction companies, with ICRA reporting that year-on-year growth in revenues in H1 FY25 for a sample of 19 companies with a collective turnover of ₹1.28 trillion in FY24 stood at just 1.5%.

However, ICRA does expect construction activity to pick up in the second half of FY25 (H2 FY25). Suprio Banerjee, the Vice President and Co-Group Head of Corporate Ratings at ICRA mentioned that while the inflow of orders in the road sector has remained subdued for the past year, some other segments have registered healthy inflow, including urban transportation, drinking water, and sewage treatment.

Such optimism aside, the companies involved in road projects for the Central Government are likely to face revenue pressure on account of fierce competition and awards of bids at huge discounts to base prices. Operating margins of the sector declined from 12% in FY22 to 11.1% in FY24, while ICRA estimates operating margins in the range of 10.5% to 11% in FY25 and FY26.

Still, ICRA has assigned a stable outlook for the sector on account of moderate leverage and satisfactory coverage metrics. This is expected to maintain a steady cash conversion cycle, with leverage levels likely to rise owing to increased working capital requirements, that are supported by benefits associated with operational leverage. The interest coverage ratio is likely to remain satisfactory at 3.6-3.9 times in FY26.