Indiabulls Real Estate Ltd

Dear Shareholders,

Your Directors have pleasure in presenting the 3rd Annual Report together with the audited statement of accounts of the Company for the financial year ended March 31, 2009.

FINANCIAL HIGHLIGHTS

The highlights of the financial results of the Company for the financial year ended March 31, 2009.

REVIEW OF OPERATIONS

The year 2008-2009 has been a year of financial turmoil with economies the world over taking a severe beating because of the prevailing recessionary conditions which have left no business sector untouched.

The times were particularly hard for the realty sector which witnessed a sharp dwindling of new business opportunities and almost complete lack of takers for the built up projects. What made the situation worse was the liquidity crunch coupled with a sharp increase in the costs of financing, in the market.

These unhealthy developments put the margins under severe pressure, the result being a plummeting profitability.

Your Company went through a bad phase as well with a drop in operating income and profitability in the year 2008-2009 as compared to the financial year 2007-2008. The operating revenues and Profits after tax were Rs. 4502.81 lacs and Rs. 1656.15 lacs respectively in the financial year 2008-2009, compared to Rs. 4,777.29 lacs and Rs.46,769.91 lacs respectively in the financial year 2007-2008.

However the scenario has brightened now with the world economies showing signs of emerging out of recession and the economic situation in the country looking upwards.

SIGNIFICANT DEVELOPMENTS

• Acquisition of a foreign Company and Issue of Global Depository Receipts

During the year under review, the Company has acquired the entire paid-up capital of Dev Property Development Limited (DPD), a company incorporated and registered in the Isle of Man, pursuant to a Scheme of Arrangement, approved by the High Court of Justice, Isle of Man. In terms of the approved Scheme, the Company had issued 16,685,580 GDRs, an equivalent number of underlying Equity shares of face value Rs. 2 each, to the shareholders of DPD, in consideration for the acquisition of DPD shares by the Company.

• Scheme of Amalgamation of Subsidiaries

During the year under review, pursuant to a Court approved Scheme of Amalgamation Indiabulls Power Services Limited, a wholly owned subsidiary of the Company, was merged with Sophia Power Company Limited, a majority owned subsidiary of the Company now known as Indiabulls Power Limited. (IPL). Consequent to the allotment of additional Equity shares by IPL to the Company, in terms of the approved Scheme, the Company's stake was increased to 71.43% in IPL.

• Raising of funds through Qualified Institutional Placement

The Company has successfully raised funds aggregating Rs. 2656,49,99,705/- through QIP placement of 14,35,94,593 Equity shares of the face value of Rs.2 each at a issue price of Rs.185 per share, with Qualified Institutional Buyers. This has resulted in increasing the outstanding Equity Shares of the Company from 25,75,20,646 to 40,11,15,239.

• Filing of Draft Red Herring Prospectus by Indiabulls Power Limited.

Indiabulls Power Limited., a subsidiary of the Company, has filed its Draft Red Herring Prospectus with the Securities and Exchange Board of India ("SEBI") on July 15, 2009 in relation to its Initial Public Offer of equity shares.

DIVIDENDS

During the financial year 2008-2009 the Company has paid preference dividend @10% aggregating Rs.137,540,006/- (excluding Corporate Dividend Tax thereon) to Oberon Limited, a foreign entity, as per the agreed terms.

As regards the payment of dividend on Equity shares, your directors, in anticipation of the future fund requirements for various projects, being undertaken by the Company through its subsidiaries and associates, did not recommend any dividend.

WARRANTS/EMPLOYEES STOCK OPTIONS

During the Financial Year, the Employee Stock Option Scheme titled Indiabulls Real Estate Limited Stock Option Scheme - 2008 (the "ESOS Scheme 2008"), covering 15,00,000 stock options, was cancelled and withdrawn.

However, with a view to reward performance and to retain talented employees of the Company and its subsidiaries, a new scheme titled 'Indiabulls Real Estate Limited Employee Stock Option Scheme 2008 II' (the "ESOS Scheme 2008 II") was launched. The Scheme covers 20 lacs stock options convertible into an equivalent number of Shares of face value of Rs. 2 each. The Compensation Committee has granted the said 20 lacs options to eligible employees, at an exercise price of Rs. 110.50. The stock options so granted shall vest in eligible employees within 10 years, with effect from January 31, 2010, the first vesting date.

Subsequent to year end, upon exercise of stock options vested in terms of Indiabulls Real Estate Limited - Employees Stock Option Scheme 2006 by certain eligible employees and receipt of full consideration therefor, the Board at its meeting held on August 11, 2009, has allotted an aggregate of 2,25,000 Equity shares of face value Rs. 2/- each to such employees. Consequent to this allotment, the paid-up Equity share capital of the Company stands increased from Rs. 80,22,30,478/- divided into 40,11,15,239 Equity shares of face value Rs. 2/- each to Rs. 80,26,80,478/- divided into 40,13,40,239 Equity shares of face value Rs. 2/- each.

The disclosures required to be made in the Directors Report in respect of the stock options granted under various employee stock option schemes in force in the Company, in terms of the format prescribed under SEBI (Employee Stock Option Scheme and Stock Purchase Scheme) Guidelines 1999, are set out in the annexures forming a part of this report.

The Company had allotted 1,50,00,000 warrants to its Promoters on August 9, 2007 and 4,30,00,000 warrants to its Promoters and Joint Managing Directors on November 5, 2007 on a preferential basis, convertible into equivalent number of its equity shares. The warrant holders had not exercised their right to convert their warrants into Equity shares hence, the warrants allotted in their favour were lapsed and the 10% upfront money paid at the time of allotment of warrants were forfeited and credited to Capital Reserve.

FIXED DEPOSITS

The Company has not accepted any deposits from the public during the year under review.

SUBSIDIARIES

The statement pursuant to Section 212(1) (e) of the Companies Act, 1956 relating to subsidiary companies forms a part of the financial statements.

In terms of approval granted by the Ministry of Corporate Affairs, Government of India vide letter No. 47/515/2009-CL-III dated 30.07.2009 under Section 212(8) of the Companies Act, 1956, copies of the Balance Sheet, Profit and Loss Account, Reports of the Board of Directors and Auditors of the subsidiaries of the Company as of March 31, 2009 have not been attached with the Balance Sheet of the Company. These documents will be made available upon request by any

Member of the Company interested in obtaining the same. However, as directed by the Ministry of Corporate Affairs, the financial data of the subsidiaries have been furnished under 'Details of Subsidiaries' forming part of the Annual Report. Further, pursuant to Accounting Standard AS-21 issued by The Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company includes financial information of its subsidiaries.

DIRECTORS

In accordance with the provisions of Section 255 and 256 of the Companies Act, 1956 and the Article 129 of the Articles of Association of the Company Mr. Prem Prakash Mirdha, Mr. Narendra Gehlaut and Mr. Vipul Bansal retire by rotation at the ensuing Annual General Meeting of the Company and being eligible offer themselves for reappointment.

Further, the term of office of Mr. Narendra Gehlaut and Mr. Vipul Bansal, as Joint Managing Directors of the Company, shall come to an end on the 8th of January 2010. In order to have the continued benefit of their acumen and experience, the Board has proposed to reappoint them as Joint Managing Directors, for a further period of five years subsequent to the expiry of their initial term as aforesaid, i.e. w.e.f. January 9, 2010.

Brief resume of the Directors seeking reappointment, nature of their expertise in specific functional areas and names of companies in which they hold directorships and memberships/ chairmanships of Board Committees, as stipulated under Clause 49 of Listing Agreement with the Stock Exchanges in India, are provided in the Report on Corporate Governance forming part of the Annual Report.

LISTINGWITH STOCK EXCHANGES

The equity shares of the Company continue to remain listed with the Bombay Stock Exchange Limited (BSE) and the National Stock Exchange of India Limited (NSE). The listing fees payable to both the exchanges for the financial year 2009-2010 have been paid. The Global Depository Receipts issued by the Company continue to be listed on the Luxembourg Stock Exchange.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management's Discussion and Analysis Report for the year under review, as stipulated under clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report.

CORPORATE GOVERNANCE REPORT

Pursuant to clause 49 of the Listing Agreements with the Stock Exchanges, a detailed report on Corporate Governance is included in the Annual Report. A Practicing Company Secretary's Certificate certifying the Company's compliance with the requirements of Corporate Governance stipulated under clause 49 of the Listing Agreement is attached with the Corporate Governance Report.

AUDITORS & AUDITORS' REPORT

M/s Ajay Sardana Associates, Chartered Accountants, Auditors of the Company will retire at the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for reappointment. The Company has received a certificate from the Auditors to the effect that their reappointment, if made would be in accordance with Section 224(1B) of the Companies Act, 1956. The Board recommends their re-appointment.

The Notes to the Accounts referred to in the Auditors' Report are self - explanatory and therefore do not call for any further explanation.

INFORMATION PURSUANT TO SECTION 217 OF THE COMPANIES ACT, 1956

The information required to be disclosed under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 with respect to conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, is given in the Annexure and forms a part of this Report.

In terms of the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are required to be set out in the Annexure to the Directors' Report. However, having regard to the provisions of Section 219(1) (b) (iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the Members of the Company and others entitled thereto. Any member who is interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956 your Directors confirm that:

1. in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures from the same;

2. the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2009 and the profit of the Company for the year ended on that date;

3. the Directors have taken proper and sufficient care for maintaining of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

4. the Directors have prepared the Annual Accounts of the Company on a 'going concern' basis.

ACKNOWLEDGEMENT

Your Directors wish to express their gratitude for the continuous assistance and support received from the investors, clients, bankers, regulatory and government authorities, during the year. Your Directors also wish to place on record their deep sense of appreciation for the contributions made and committed services rendered by the employees of the Company at various levels, to the growth & success of the Company.

ANNEXURE FORMING PART OF THE DIRECTORS' REPORT

Information pursuant to section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, in respect of conservation of energy, technology absorption and foreign exchange earnings & outgo.

A. Conservation of Energy

The Company uses electric energy for its equipment such as office equipment, computers, lighting and utilities in the work premises. As an ongoing process, the following measures are undertaken to conserve energy:

a) Implementation of viable energy saving proposals.

b) Installation of automatic power controllers to save maximum demand charges and energy.

c) Training front-end operational personnel on opportunities of energy conservation.

d) Awareness and training sessions for maintenance personnel conducted by experts.

B. Technology Absorption

The Company believes that technological obsolescence is a practical reality. Our research activities will help us to prepare for future growth & opportunities.

At the Company we encourage continuous innovations with the prime purpose of providing maximum benefits to our clients and other users by working proactively (self driven research) and reactively (client driven research).

Our objective is to carry out applied research in the areas that are closely related to realization of the business objectives of the Company and seek to encash available business opportunities.

C. Foreign Exchange Earnings and Outgo

While there were no earnings in foreign exchange during the year under review, the foreign exchange outgo on account of various heads is depicted in the table given below:

Indiabulls Real Estate Limited Employee Stock Option Scheme - 2006 (IBREL ESOS 2006)

* Subsequent to year end, certain eligible employees exercised 2,25,000 vested options in terms of IBREL ESOS 2006 and, the Board at its meeting held on August 11, 2009, has allotted an aggregate of 2,25,000 Equity shares of face value Rs. 2/- each to such employees.

Indiabulls Real Estate Limited Employees Stock Option Scheme - 2008 (II)