The Indian construction sector demonstrated both growth opportunities and notable challenges in the first half of FY2024-25, driven by a mix of economic, operational and policy factors. The sector’s total consolidated operating revenue across all segments (Ultra Large, Large, Medium, and small construction companies) reached approximately Rs.70,871 crore in H1 FY25, compared to Rs.67,126 crore in H1 FY24, reflecting a year-on-year growth of about 5.6 per cent. When including Larsen & Toubro (L&T), the largest player in  the sector, revenue rises to Rs.1,39,350 crore, representing a  11 per cent growth over H1 FY24. Similarly, the profit for H1 FY25 stands at Rs.7,281 crore when including L&T, compared to Rs.3,981 crore without it. These figures underline L&T’s outsized contribution, accounting for nearly 16 per cent of total revenue and 68 per cent of the sector’s profits in H1 FY25.While Ultra Large companies like L&T demonstrated robust growth and profitability, the industry faced mixed profitability trends overall. Excluding L&T, the sector recorded a total profit of Rs.2,326.73 crore in H1 FY25, compared to a loss of Rs.520.89 crore in H1 FY24, indicating a notable improvement. This disparity highlights L&T’s stabilising influence, which helps mask the volatility and losses incurred by smaller players, such as Tata Projects and Jaiprakash Associates, which reported significant losses. The overall financial health indicates resilience bolstered by government spending and infrastructure investments, yet profitability pressures persist, emphasising the need for cost management and efficient project execution.During April-September 2024, government project awards rose by 8 per cent year on year (YoY), primarily supported by substantial investments in critical infrastructure sectors such as roads and railways. This growth highlights the Government’s commitment to infrastructure development as a key driver of economic progress. However, delays in urban infrastructure projects – constituting nearly 20 per cent of total awards – emerged as a significant concern, leading to localised profitability disruptions and inefficiencies in project execution. Capital expenditure, or spending on building physical infrastructure, reached Rs.4.15 trillion ($ 49.18 billion) during April-September 2024, accounting for 37 per cent of the annual target of Rs.11.11 trillion for FY 2024-25. This figure was lower compared to Rs.4.9 trillion in the same period of the previous fiscal year. Despite this dip, the robust focus on capital expenditure continues to act as a crucial pillar for the sector’s resilience. There  is a strong likelihood that government capital expenditure might pick up significantly in  Q4 FY 2024-25 as efforts intensify to meet annual targets and provide an economic boost. The sector grappled with significant cost pressures, with project cost overruns escalating by 15 per cent. This was largely attributed to a 10 per cent rise in steel prices and an 8 per cent increase in cement costs, which particularly affected contractors operating under fixed-price contracts. These cost increases strained profitability and operational efficiency. A shift from the hybrid annuity model (HAM) to the build-operate-transfer (BOT) model in select sectors created financing challenges for smaller players. This shift, coupled with a 250 basis points increase in repo rates since 2023, tightened liquidity and reduced loan affordability, constraining cashflows across the sector. These factors collectively impacted financial performance, with EBITDA margins declining by 5 per cent YoY, reflecting higher costs for materials, labour and equipment, with the latter witnessing a 12 per cent increase. Interest coverage ratios dropped from 3.1x in H1FY2023-24 to  2.6x in H1FY2024-25, underscoring heightened financial stress. Additionally, project execution delays averaged four to six months, contributing to a  7 per cent decline in overall profitability.Despite these headwinds, government capital expenditure remained a critical source of support, enabling many firms to leverage larger orderbooks to counter rising costs and navigate liquidity constraints. The steady emphasis on sustainable practices and digital innovations is gradually transforming the construction landscape, ensuring resilience and paving the way for long-term growth. To navigate ongoing challenges, the sector must prioritise cost-optimisation, accelerate project execution, and leverage technological advancements. With continued government support, strategic reforms and the anticipated surge in capital expenditure in the latter half of the fiscal year, the Indian construction sector is well-positioned to make significant contributions to the country’s infrastructure and economic development goals.Performance of largest  and most profitable construction companyIndia’s largest and most profitable construction company, L&T demonstrated strong financial performance in H1FY2024-25, reflecting its ability to navigate industry challenges. Operating revenue increased by ~17.7 per cent, from Rs.58,176.17 crore in H1 FY 2023-24 to Rs.68,479.01 crore, supported by robust government infrastructure spending and sustained demand in the construction sector. Profit after tax (PAT) grew by ~10 per cent, from Rs.4,502.08 crore to Rs.4,954.45 crore, showcasing operational efficiency despite rising input costs and logistical challenges that have constrained margins  across the industry. L&T’s consistent growth underscores its leadership in leveraging large-scale projects and cost management to deliver  strong results, aligning with the broader infrastructure-driven demand highlighted in the consolidated analysis.Performance of ultra-large construction companiesThe financial performance of ultra-large construction companies (turnover over Rs.10,000 crore) in H1FY2024-25 reflects the challenges outlined in the consolidated industry analysis. Combined operating revenue grew modestly by ~3.7 per cent, from Rs.30,174 crore in H1FY2023-24 to Rs.31,302 crore, driven by robust government spending on infrastructure. However, PAT declined by ~16.5 per cent, from Rs.780.85 crore to Rs.651.34 crore, due to rising input prices (10 per cent increase in steel, 8 per cent in cement), higher equipment costs (up 12 per cent), and project cost overruns (15 per cent). NCC showed strong PAT growth of ~56 per cent, supported by efficient project execution, while Dilip Buildcon saw a ~52 per cent drop in PAT due to stagnant revenue and increased cost pressures. Tata Projects reported a widening loss of Rs.161.5 crore, attributed to project delays (four to six months’ average) and financing challenges stemming from rising repo rates and liquidity constraints. These results underscore the sector’s struggle to balance increased material and labour costs with declining EBITDA margins and tightened cashflows, despite the support of larger orderbooks and government capital expenditure.Performance of large construction companiesThe financial performance of large construction companies (turnover over Rs.7,000 crore) in H1FY2024-25 reflects the sector’s resilience amid rising input costs, project delays and tightened liquidity. Combined operating revenue grew by ~6.6 per cent, from Rs.14,912.81 crore in H1FY 2023-24 to `15,214.15 crore, while PAT rose ~14.9 per cent, from Rs.892.76 crore to Rs.1,173.32 crore, driven by strong execution efficiencies. ITD Cementation and NBCC reported significant PAT growth of ~63 per cent and ~46 per cent, respectively, supported by increased order execution and stable cashflows. PNC Infratech achieved a 69 per cent PAT rise despite an ~18 per cent revenue decline, reflecting strong cost management. However, GR Infraprojects faced a ~19 per cent PAT drop and ~15 per cent revenue decline due to cost pressures, including a 10 per cent rise in steel and 8 per cent rise in cement prices, and tighter margins. These mixed results highlight the sector’s struggles with elevated costs and delays but demonstrate the ability of some firms to leverage government spending and operational efficiencies to sustain growth.Performance of medium construction companiesThe financial performance of medium-sized construction companies (turnover between Rs.2,000 crore and Rs.7,000 crore) in H1FY2024-25 reflects mixed outcomes amid rising costs, project delays and liquidity constraints. Combined operating revenue grew by ~7.2 per cent, from Rs.20,072.64 crore in H1FY 2023-24 to Rs.21,379.19 crore, driven by robust government infrastructure spending. KNR Constructions posted impressive PAT growth of ~123 per cent, and HG Infra and J Kumar InfraProjects reported increases of ~27 per cent and ~20 per cent, supported by efficient project execution and cost management. In contrast, Ahluwalia Contracts and PSP Projects experienced PAT declines of ~34 per cent and ~41 per cent, respectively, due to rising material costs and financing expenses. Jaiprakash Associates continued to struggle, reporting a widened loss of Rs.-1,356.96 crore due to cost overruns and liquidity challenges. These results underscore the sector’s broader challenges but also highlight the ability of certain companies to leverage operational efficiencies and government spending to sustain growth.Performance of small construction companiesSmall construction companies (turnover less than Rs.2,000 crore) in H1FY2024-25 showed strong revenue growth but faced profitability pressures due to rising costs and operational challenges. Combined operating revenue increased by ~26 per cent, from Rs.2,466.88 crore in H1FY2023-24 to Rs.2,976.44 crore, while PAT grew by ~32.5 per cent, from Rs.122.34 crore to Rs.161.96 crore. Capacite Infraprojects led with a ~151 per cent PAT increase, supported by significant revenue growth and operational efficiencies. GPT Infraprojects also posted robust PAT growth of ~45 per cent, while BL Kashyap & Sons showed steady growth of ~16.5 per cent. Conversely, Vascon Engineers experienced a ~46 per cent PAT decline, reflecting challenges from rising material costs and inefficiencies. These results highlight the resilience of small companies in leveraging infrastructure demand while managing the sector-wide pressures of increased input costs and liquidity constraints.The Indian Cement IndustryThe Indian cement industry navigated a dynamic landscape in the first half of FY2024-25, marked by robust demand growth but rising cost pressures. Cement consumption increased by 6-8 per cent YoY during April-September 2024, driven by heightened infrastructure spending and sustained activity in the residential housing segment. This growth reflects the industry’s integral role in supporting India’s ambitious infrastructure projects under government schemes like the Pradhan Mantri Awas Yojana (PMAY) and Bharatmala. However, regional disruptions due to a delayed monsoon temporarily softened demand, adding volatility to price stability.Cost pressures posed significant challenges, with  coal and petcoke prices rising by 12 per cent and 8 per cent, respectively, compared to the previous year, coupled with a  10 per cent hike in logistics expenses. These factors eroded profitability, despite a 3-5 per cent increase in cement prices, which proved insufficient to offset rising costs. As a result, EBITDA margins for leading players contracted by 4-5 percentage points, averaging 16 per cent compared to 21 per cent in H1FY2023-24. Higher borrowing costs, stemming from repo  rate hikes, further strained financial metrics, with interest coverage ratios weakening from 3.5x to 3.0x.Export volumes also declined by 7 per cent, reflecting global economic slowdowns and elevated freight rates, which limited the industry’s ability to capitalise on international markets. Nevertheless, capacity utilisation improved slightly, averaging 75-80 per cent, supported by robust government capital expenditure, which achieved 55 per cent of its annual target by September 2024. This infrastructure-led demand provided a much-needed buffer against cost challenges.The industry’s resilience  is evident in its efforts to adapt to evolving market dynamics.  To sustain profitability amid rising input costs and logistical challenges, cement manufacturers are increasingly focusing on operational efficiencies, exploring alternative fuels  and recalibrating pricing strategies. Further, investments  in sustainable practices and energy-efficient technologies  are gaining momentum,  aligning with global trends and regulatory requirements.Looking ahead, the Indian cement industry remains well-positioned to benefit from continued government infrastructure spending and housing demand. Strategic focus on cost-optimisation, innovation and market diversification will be critical for players to maintain growth and strengthen profitability in an increasingly competitive environment.Performance of large  cement companiesThe financial performance of large Indian cement companies (turnover over Rs.8,000 crore) in H1FY2024-25 reflects the challenges highlighted in the industry analysis. Combined operating revenue for these companies declined marginally by approximately 4 per cent YoY, from Rs.53,451.79 crore in H1FY2023-24 to Rs.51,305.02 crore in H1FY 2024-25. PAT, however, saw a sharper decline of nearly 77 per cent, from a combined Rs.5,101.74 crore to Rs.2,886.53 crore, illustrating the impact of rising input costs and logistical expenses. EBITDA margins contracted sector-wide, reflected in the individual metrics of major players like JK Cement, Ultratech, and Shree Cement, whose PAT dropped significantly. With an average revenue decline of 4-6 per cent and an 83 per cent reduction in profits for some players, the financial strain underscores the need for operational efficiencies and pricing recalibration to navigate the industry’s cost pressures and subdued export demand.Performance of medium cement companiesThe financial performance of medium-sized cement companies (turnover between Rs.2,000 crore and Rs.7,000 crore) in H1FY2024-25 reflects the broader industry challenges of rising costs and squeezed margins. Combined operating revenue for Star Cement and Orient Cement declined by ~10.4 per cent, from Rs.1,306 crore in H1FY2023-24 to Rs.1,186 crore in H1FY2024-25, while their PAT plummeted by ~89 per cent, from `65.62 crore to `8.32 crore. Orient Cement faced a sharper revenue decline of ~24 per cent and a 90 per cent drop in PAT, while Star Cement saw its PAT decline by ~85 per cent, with minimal revenue growth. These figures align with the sector-wide contraction in profitability due to elevated coal, petcoke and logistics costs, underscoring the need for medium players to enhance operational efficiencies and mitigate cost pressures to sustain performance.Performance of small  cement companiesThe financial performance of small Indian cement companies (turnover less than Rs.2,000 crore) in H1FY2024-25 underscores the significant impact of rising costs and limited scale advantages on profitability. Combined operating revenue for Udaipur Cement Works and Shree Digvijay Cements declined by ~4.3 per cent, from Rs.645.52 crore in H1FY2023-24 to Rs.616.86 crore in H1 FY 2024-25, while PAT plummeted from `37.15 crore to a net loss of `6.66 crore. Udaipur Cement Works shifted to a loss of Rs.18.33 crore, and Shree Digvijay Cements saw a 53 per cent drop in PAT, reflecting the inability to offset rising input and logistical costs. These challenges mirror the broader industry trend of squeezed margins, with smaller players disproportionately affected due to limited capacity to manage cost escalations and pricing inefficiencies.The Indian Steel IndustryThe Indian steel industry showcased resilience amid challenges in H1FY2024-25, navigating a mix of robust domestic demand and global uncertainties. Domestic steel consumption increased by 6 per cent YoY, driven by significant government investments in infrastructure, including railways, highways and housing under initiatives like PMAY and Bharatmala. However, global headwinds, such as a slowdown in China’s economy and volatile commodity prices, led to a 5 per cent decline in steel exports, putting pressure on overall revenue growth.Cost pressures intensified during this period, with coking coal prices rising by 15 per cent YoY, contributing to a 12 per cent increase in production costs, alongside elevated energy tariffs. Although domestic steel prices rose modestly by 4-6 per cent, manufacturers struggled to fully offset the rising costs, resulting in a contraction of EBITDA margins from 19 per cent in H1FY2023-24 to 15 per cent in H1FY2024-25. Financing challenges, spurred by repo rate hikes, further strained the sector, with interest coverage ratios declining from 4.2x to 3.5x.Despite these challenges, production and capacity utilisation remained steady, averaging 77-80 per cent, underpinned by robust government capital expenditure, which reached 55 per cent of its annual target by September 2024. However, regional issues like monsoon delays temporarily disrupted construction activity, affecting short-term demand. The sector also witnessed a growing shift towards sustainability, with leading players increasing investments in green steel initiatives, renewable energy and energy-efficient production technologies, aligning with global decarbonisation efforts.Looking ahead, while the steel industry remains a critical pillar of India’s infrastructure growth, rising input costs and subdued export markets continue to weigh on profitability. To navigate these challenges, companies must focus on cost-optimisation, diversifying raw material sources and leveraging sustainable innovations. With continued government support and strategic reforms, the Indian steel industry is poised to strengthen its position as a global leader in infrastructure and sustainable manufacturing.Performance of steel companiesThe financial performance of large Indian steel companies (turnover over Rs.15,000 crore) in H1FY2024-25 reflects the sector’s cost and export challenges, as highlighted in the consolidated analysis. Combined operating revenue declined by ~5.7 per cent, from Rs.218,280.67 crore in H1FY2023-24 to Rs.205,824.37 crore, driven by a 5 per cent drop in exports despite 6 per cent domestic demand growth. PAT have risen sharply by ~140 per cent, from Rs.5,241 crore to Rs.12,620.94 crore, impacted by reduction in operational costs, particularly in raw materials such as coking coal and iron ore along with recovery in the automotive sector and government infrastructure projects especially in August and September. JSW Steel and SAIL saw PAT declines of ~46 per cent and ~39 per cent, while Tata Steel reversed a loss of Rs.3,275 crore to post Rs.6,921 crore in profit, reflecting stronger domestic performance. These results highlight the industry’s constrained margins and the need for cost-optimisation amid rising input costs and global headwinds.The Indian Paints IndustryThe Indian paints industry recorded steady growth in the first half of FY2024-25, driven by robust domestic demand and evolving consumer preferences. Domestic demand increased residential construction and heightened repainting activities during the festive season. The industrial paints segment also showed moderate growth of 5 per cent, reflecting a revival in the automotive sector. However, export markets remained subdued, with a 3 per cent YoY decline, as weakened demand from Europe and the Middle East, coupled with volatile crude oil prices and forex fluctuations, added to external pressures.Rising raw material costs posed significant challenges for the industry, with prices for titanium dioxide (TiO-2) and solvent-based derivatives increasing by 10-12 per cent, alongside higher logistics and energy expenses. Despite price hikes of 4-5 per cent, companies struggled to absorb these cost surges, leading to a contraction in EBITDA margins from 21 per cent in H1FY2023-24 to 17 per cent in H1FY2024-25. Revenue grew by an average of 7 per cent YoY, driven primarily by domestic sales, but PAT growth remained muted at 3 per cent due to higher finance and marketing costs.Operationally, capacity utilisation remained robust at 85 per cent, reflecting steady production levels even during the monsoon season, which traditionally softens demand. The industry continued its shift towards sustainability, with companies ramping up investments in renewable energy, green technologies and eco-friendly products to meet changing consumer preferences and regulatory mandates.Looking ahead, the paints industry is well-positioned to maintain its growth trajectory, supported by sustained domestic demand and the expansion of its footprint in Tier-2 and Tier-3 cities.Performance of paints companiesThe financial performance of major Indian paint companies in H1FY2024-25 reflects steady domestic demand but significant profitability pressures due to rising costs. Combined revenue increased marginally by ~1.35 per cent, from Rs.26,787.69 crore in H1FY2023-24 to Rs.26,425.78 crore, driven by an 8 per cent rise in domestic demand, particularly in decorative paints. However, PAT declined sharply by ~33.3 per cent, from Rs.4,366.87 crore to Rs.2,912.57 crore, due to higher raw material costs (10-12 per cent increase in TiO-2 and solvents) and elevated energy and logistics expenses. Asian Paints reported a ~4.3 per cent revenue decline and a ~33 per cent PAT drop, reflecting cost pressures despite price hikes. Berger Paints and Kansai Nerolac also faced PAT declines of ~6 per cent and ~60 per cent, respectively, while Akzo Nobel India achieved modest PAT growth of ~4 per cent. These results align with the industry’s contraction in EBITDA margins, emphasising the need for cost management and strategic expansions to mitigate rising input costs and sustain growth.The Indian Tiles, Ceramic and Sanitaryware IndustryThe Indian tiles, ceramic and sanitaryware industry exhibited steady growth in the first half of FY2024-25, supported by robust domestic demand and increased urbanisation. Domestic demand rose by ~8 per cent YoY, driven by strong construction activity in residential and commercial real estate and government initiatives like PMAY and the Smart Cities Mission. However, export growth slowed, declining by ~4 per cent, reflecting global economic uncertainties, weakened demand in key markets such as Europe and the Middle East, and volatile freight rates.Operational costs surged during this period, with raw material prices, particularly for feldspar and zirconium, rising by ~12 per cent and energy costs increasing by ~10 per cent, driven by elevated gas prices. This contributed to a ~13 per cent rise in overall production costs. Despite a 5-6 per cent increase in product prices, manufacturers struggled to fully offset these cost burdens, resulting in a contraction of EBITDA margins from ~18 per cent in H1FY2023-24 to ~14 per cent in H1FY2024-25. Financing pressures were also evident, with interest coverage ratios declining from 3.2x to 2.8x due to rising repo rates and tightened liquidity conditions.Production levels remained steady, with capacity utilisation averaging ~80 per cent, buoyed by resilient domestic demand and investments in advanced production technology. However, regional challenges such as monsoon delays in certain states temporarily slowed construction activity. The sector also accelerated its shift toward sustainable practices, with companies increasingly adopting water recycling, solar energy integration and low-emission kilns to meet environmental regulations and evolving consumer preferences.Despite these challenges, the industry remains well-positioned to capitalise on growing urbanisation and domestic demand. Companies must prioritise cost-optimisation, raw material diversification and expanding their presence in Tier-2 and Tier-3 cities to sustain growth. Strategic investments in sustainability and digitalisation will be essential to enhance competitiveness and capture long-term growth opportunities, ensuring the industry’s resilience in an evolving market landscape.Performance of tiles, ceramic and sanitaryware companiesThe financial performance of major tiles, ceramic and sanitaryware companies in H1FY2024-25 reflects the challenges highlighted in the consolidated industry analysis, with stable domestic demand but rising costs and export pressures impacting profitability. Combined revenue for these companies declined slightly by ~3.4 per cent, from Rs.8,554.75 crore in H1FY2023-24 to Rs.8,304.91 crore, despite domestic demand growth of ~8 per cent, due to slower exports and monsoon-related construction delays. PAT declined sharply, from `453.96 crore to `76.89 crore, representing an ~83 per cent drop, driven by rising raw material costs (~12 per cent) and elevated energy expenses (~10 per cent).Kajaria Ceramics and Cera Sanitaryware maintained stable performance, with PAT declines of ~6 per cent and ~2 per cent, respectively, reflecting resilience in operational efficiency. Asian Granito and Somany Ceramics saw sharper PAT drops of ~51 per cent and ~36 per cent, respectively, due to higher input and logistics costs. H&R Johnson India reported a loss of Rs.78.5 crore, reversing a profit of `188.62 crore, highlighting severe cost pressures and export challenges. Orient Bell widened its loss to `180 crore, reflecting inefficiencies and cost overruns. These financials align with the industry’s contraction in margins (from ~18 per cent to ~14 per cent), emphasising  the need for cost control, sustainable practices and diversification into growing domestic markets to offset rising costs and global uncertainties.The Indian Wood and Wood Products IndustryThe Indian wood and wood products industry demonstrated steady growth during the first half of FY2024-25, supported by robust domestic demand and a resurgence in real-estate and construction activities. Domestic demand grew by ~7 per cent YoY, driven by increased residential and commercial projects, along with a rising consumer preference for premium wood-based furniture and flooring solutions. However, exports declined by ~6 per cent, reflecting subdued global demand, particularly from Europe and the US, and challenges posed by volatile freight rates and forex fluctuations.The industry faced significant cost pressures during this period. Timber and adhesive prices increased by ~12 per cent, alongside elevated energy and transportation expenses, contributing to a ~10 per cent rise in production costs. Despite price hikes of 4-5 per cent for finished wood products, manufacturers struggled to offset these rising costs, leading to a contraction in EBITDA margins from ~17 per cent in H1FY2023-24 to ~13 per cent in H1FY2024-25. Financing constraints were evident, with interest coverage ratios declining from 3.0x to 2.5x, as rising repo rates and tightened liquidity conditions particularly impacted smaller players.Production levels and capacity utilisation remained steady at ~75-78 per cent, supported by resilient domestic demand, though monsoon delays in some regions temporarily slowed construction activities. The industry is also witnessing a notable shift toward sustainability, with companies investing in certified wood, recycled materials and energy-efficient manufacturing processes. These efforts align with regulatory requirements and the growing consumer preference for eco-friendly products.While the Indian wood and wood products industry benefits from strong domestic demand and expanding urbanisation, profitability continues to face headwinds from rising input costs, export challenges and financing pressures. To sustain growth, companies must focus on cost management, tap into Tier-2 and Tier-3 markets and accelerate innovation in sustainable practices. Adapting to evolving global trends and consumer expectations will be key to ensuring long-term resilience and competitiveness in the market.Performance of wood and wood productsThe financial performance of major wood and wood product companies in H1FY2024-25 reflects steady revenue growth but declining profitability due to rising input and energy costs. Combined revenue increased by ~6.6 per cent, from `4,293.41 crore in H1FY2023-24 to `4,578.33 crore, driven by a ~7 per cent rise in domestic demand. However, PAT declined by ~19.2 per cent, from `323.25 crore to `271.18 crore, due to higher timber prices (~12 per cent) and production costs. Century Plyboards saw a ~10.8 per cent revenue increase but a ~14 per cent PAT decline, while Greenpanel Industries faced a ~10.6 per cent revenue drop and a ~56 per cent PAT fall, reflecting export pressures. In contrast, Greenply Industries recorded ~9.5 per cent revenue growth and a ~35 per cent PAT rise, driven by strong domestic demand. Smaller players like Rushil Decor and Duroply Industries achieved modest PAT growth, while Archidply Industries reported a ~21 per cent PAT decline. These results underscore the industry’s struggle with margin contraction (from ~17 per cent to ~13 per cent) despite robust domestic demand, highlighting the need for cost management and market diversification.The Indian Real-Estate IndustryThe Indian real-estate industry exhibited resilience and growth in the first half of FY2024-25, bolstered by robust domestic demand and government-driven infrastructure initiatives. Residential sales in H12024 reached an 11-year high, with approximately 170,000 units sold, marking an 11 per cent YoY increase. This surge was fuelled by heightened activity under schemes like PMAY, growth in affordable housing and increased commercial space uptake, particularly in Tier-2 and Tier-3 cities. However, challenges emerged in the premium and luxury segments, impacted by rising interest rates, global economic uncertainties and subdued FDI inflows.Operational costs rose significantly during the period, with construction material prices increasing by approximately 10 per cent for cement and 8 per cent for steel, alongside elevated labour and energy costs. These pressures led to a contraction in EBITDA margins from around 20 per cent in H1FY2023-24 to approximately 17 per cent in H1FY2024-25. Financing costs added further strain, with repo rate hikes of 250 basis points since 2023 affecting liquidity and raising borrowing costs for developers. Interest coverage ratios declined from 3.8x to 3.2x, highlighting heightened financial stress, particularly for small and midsized players.Residential project launches grew by about 12 per cent YoY, driven by strong demand in the mid-income and affordable housing segments, while office space demand increased by approximately 6 per cent, supported by IT/ITES and flexible workspace solutions. However, sales in the ultra-luxury segment softened due to higher borrowing costs. Exports, particularly cross-border investments in commercial properties, declined by around 4 per cent, reflecting global economic headwinds. The industry continued its transition toward sustainability, with developers increasingly adopting green building technologies, energy-efficient designs and water conservation measures to align with regulatory norms and shifting consumer preferences. Additionally, the adoption of digital platforms and PropTech solutions streamlined customer engagement and property management, boosting efficiency.While the real-estate sector remains a key driver of India’s economic growth, profitability is under pressure from rising input costs, financing challenges and global uncertainties. To maintain momentum, developers must focus on cost-optimisation,  expand into growing Tier-2 and Tier-3 markets and integrate sustainable practices. These strategies will be critical to ensuring resilience and adaptability in an evolving market landscape.Performance of real estate The financial performance of major Indian real-estate companies in H1FY2024-25 reflects the trends highlighted in the consolidated analysis, with strong revenue growth driven by domestic demand but profitability impacted by rising input costs and financing challenges. Combined revenue  for these companies grew significantly by ~26 per cent, from `19,369.05 crore in H1FY2023-24 to `24,406.72 crore in H1FY2024-2025, in supported by robust activity in residential and commercial real estate, particularly in mid-income and affordable housing segments. PAT, surged dramatically, witnessing an impressive 625 per cent from `523.24 crore to `3,789.55 crore, despite persistent cost pressures and rising interest expenses.Lodha Group and Godrej Properties demonstrated exceptional revenue growth of  ~62 per cent and ~58 per cent, respectively, with Lodha’s PAT surging to `900 crore from  `380 crore (~137 per cent) due to strong residential sales. Oberoi Realty also posted impressive revenue growth of ~41 per cent and a PAT increase of ~76 per cent, reflecting efficient execution and strong demand. In contrast, DLF Ltd saw flat revenue and a ~43 per cent PAT decline, affected by rising operational and financing costs. Prestige Group reported robust revenue growth (~6 per cent) but a significant PAT drop from `1,680 crore to `376 crore (~78%), reflecting challenges in cost absorption.Smaller players like Rustomjee and Sobha Ltd achieved moderate revenue growth (~8 per cent and  ~5 per cent, respectively), with Rustomjee’s PAT more than doubling to `95.7 crore (~135 per cent). However, Brigade Enterprises faced significant challenges, with a PAT loss of `-551 crore, driven by cost overruns and operational inefficiencies. These results align with the industry’s contraction in margins (from ~20 per cent to ~17 per cent) despite strong revenue growth, emphasising the need for cost-optimisation and strategic market expansion to sustain profitability.