ANNEXURE 3 to CG
MACROECONOMIC OVERVIEW:
Financial Year 2023 witnessed a mix of economic trends and conditions across different
regions globally. The major advanced economies experienced varying degrees of performance.
The United States witnessed moderate 2.1% growth in 2022, despite raising their interest
rates from 0.25% in March-2022 to 5.25% in May2023 to combat inflationary pressures.
Sudden rapid increase in repo rates has led to building up of some stress in their
financial system, even witnessed a few banks collapse since beginning of 2023. The
repercussions of such rapid monetary tightening may not be completely done away with. The
Eurozone, on the other hand, faced with challenges due to supply chain disruptions caused
by geopolitical situation and lingering effects of the pandemic, managed to grow at 3.5%.
Japan struggled with a slow recovery and deflationary pressures and grew by 1.1%. China
remained a key player, with a focus on rebalancing its economy and implementing structural
reforms, was also reeling under late effects of Covid and registered meagre growth of 3.0%
in 2022. Overall, the world economy clocked a moderate growth of 3.4% in FY 2023.
In contrast, India, as worlds fifth largest economy, has been a bright spot in FY
2023, registering growth of 7.2%, underscoring the countrys economic resilience amid
geopolitical conflicts and global headwinds. Though very significantly influenced by
global economic trends, supply chains and commodity prices, FY 2023 had both positive and
negative impacts on the economy. India has fully come out of pandemic induced slowdown
with K-shaped recovery, where some sectors have grown better than others, Real Estate
being one of the sectors which recovered fast and strong. The Indian economy benefited
from increased public investment, a revival in consumer demand and significant progress in
structural reforms. Inflation remained persistent in the first half of the fiscal, leading
to increase in repo rates by RBI to the tune of 2.5% during the year. Economic activity
has remained strong and resilient, reflected in record GST collections. Most businesses
have done very well and have strengthened their balance sheets, to recover losses from
previous Capex investments. They are now ready to embark on fresh capacity building to
fuel their next growth cycle. Government focus on rapidly building physical and digital
infrastructure, aided by increased budget allocations will lead to higher wealth
generation and financial inclusion, going forward. The governments focus on attracting
foreign capital through initiatives such as "Make in India", "China Plus
One strategy" and "ease of doing business" reforms continued to be
relevant. FY 2023 witnessed a mixed FDI flow into India. While some sectors attracted
significant investments, others faced challenges. Global financial market trends also
influenced Indias domestic markets during FY 2023. Volatility in international stock
markets, changes in interest rates by major central banks and shifts in investor sentiment
had spillover effects on Indian equities and capital flows, which remained volatile
through the year. With increase in interest rates real estate stocks became out of favor
with investors during second and third quarter of FY 2023, recovering moderately towards
the end of the year Indias GDP touched USD 3.75 trillion in FY 2023 and according to the
OECD, India is set to be the fastest growing economy in the G-20 over next few years,
despite decelerating global demand and the tightening of monetary policy to manage
inflationary pressures.
GLOBAL ECONOMY
The global economy remained uncertain with continued disruption in the supply chain,
increased commodity prices due to the geopolitical uncertainties and ebbing of the
Pandemic. Supply disruptions, commodity price rises, and pent-up demand have led to a high
inflationary environment forcing Central Banks across the globe to adopt aggressive
tightening monetary policy, resulting in a steep rise in the interest rates. Focused
actions on returning inflation to targeted levels have started to exhibit some green
shoots, however, Central Banks and the Policymakers continue to keep a close watch on
these aspects.
For emerging market and developing economies, growth is projected to rise modestly,
from 3.9% in CY2022 to 4.0% in 2023. Growth in emerging and developing Asia is expected to
rise in CY2023 to 5.3% after the deeper-than-expected slowdown in CY2022 to 4.3%
attributable to Chinas economy. Growth in China is projected to rise reflecting rapidly
improving mobility an d full reopening. Indias economy on the other hand, will slow down
from 6.8% in CY2022 to 5.9% in CY2023 as per world economic outlook, impacted by rising
global inflation and the resultant interest rate hikes.
There are numerous downside risks to weigh on outlook like stalling recovery in China,
escalation of war in Ukraine, sudden repricing in financial markets, and geopolitical
fragmentation. Also, high post-pandemic debt burden will pose to be an ongoing challenge
for many countries over the next few years.
The upside though can come through pent-up demand boost fueled by excess private
savings from pandemic fiscal support and in many cases, still-tight labor markets and
solid wage growth; Or through faster disinflation as easing in labor market pressures in
some advanced economies due to falling vacancies could cool wage inflation.
INDIAN ECONOMY
The Indian economy continues to remain fairly resilient in the last year despite the
global headwinds. However, it will see a moderation in growth in FY24 to 5.9-6.3% as per
various estimates as against 6.9% in FY23. Rising borrowing costs and slower income growth
will weigh on private consumption growth, and government consumption is projected to grow
at a slower pace due to the withdrawal of pandemic-related fiscal support measures.
Despite this, India will remain one of the fastest growing economies in a challenging
global environment.
Indias GDP grew by 6.9% in FY23 due to steadfast domestic demand, governments
unwavering focus on infrastructure spending and low base effect. Volatile commodity prices
have impacted profitability, particularly of MSMEs, while export-oriented sectors face
headwinds from a slowdown in their major markets. The headwinds of higher input cost and
challenging global environment will continue in FY24 also.
The Economic Survey 2022-23 projects a baseline GDP expansion of 6.5% for FY24, which
is similar to assessments by the Asian Development Bank, and the Reserve Bank of India.
Controlled inflation and increased private sector investments are among the key factors
supporting Indias GDP growth. The Emergency Credit Linked Guarantee Scheme (ECLGS) has
aided the Micro, Small, and Medium Enterprises (MSME) sector, which has witnessed
substantial credit expansion. Apart from boosting infrastructure, the central governments
capital expenditure has also helped improve rural living conditions, boosting overall
demand. Employment generation and food security measures have been aided by better
implantation of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS),
PM-Kisan, and PM Garib Kalyan Yojana. Despite some global economic headwinds, the Indian
economy, now the fifth largest, will persist in its trajectory and regain its pre-pandemic
growth rate.
INDUSTRY REVIEW
The Government of India has projected very large investment requirements for providing
infrastructure to specified norms and also supporting the growth process. They have also
identified the need for introducing modern technologies to increase the speed and
efficiency of developing this infrastructure. Therefore, the Government of India is
actively striving towards stimulating construction activities in the country.
The Indian Infrastructure and Construction Sectors have moved out of their nascent
stages. For the past few decades, both government as well as private developers were
targeting the "Low Hanging Fruits", i.e., projects which were easy to execute
and provided the maximum economic benefit. However, now there is substantial opportunity
to undertake complex and complicated projects wherein the competing factor for
construction majors shall not only be cost efficiency but also technological competence
and efficiency.
The residential real estate market in India had astounding progress in 2022, setting
new sales records of 68% year on year, further demonstrating the industrys prominence as
one of Indias fastest growing industries. After 2 years of being affected by COVID, Tier
2 and Tier 3 cities have arisen as fresh major real estate trends in 2022, and the real
estate market has set unprecedented benchmarks which continued its growth momentum from
2021 amid the global slowdown.
REAL ESTATE SECTOR
The post-pandemic picture for real estate sector is a paradigm shift from before. The
pandemic has reinstated the importance of home ownership and the attitude of customers
towards residential properties has seen a substantial shift. Preference for larger sized
apartments, inclination towards reputed developers and a rising demand for townships
projects are just some of the emerging trends.
Fiscal 2023 was a milestone year for the Indian Real estate sector with all-time high
sales. The sector showed healthy growth on the back of a high base achieved in fiscal
2022. The demand pick-up seen in the second half of fiscal 2021 has continued into fiscal
2023 and is expected to continue in fiscal 2024. The number of launches are also
increasing and touched a decadal high last year, inventory is continuing to show a decline
or stability across Tier-1 cities, indicating a healthy demand momentum.
While the residential segment witnessed strong performance, commercial office sector
continues to remain sluggish with demand not yet reaching the pre-pandemic levels. The
challenges to office space demand has been the work from home trend and slowdown in global
economic growth. The global slowdown directly impacts sectors like IT/ITeS which is the
major occupier of office space in India.
Retail real estate sector though, is back to full swing with consumption recovering
beyond pre-pandemic levels and should continue the momentum.
OUTLOOK
The Indian construction and real estate sector continues to be a favored destination
for global investors. Several large global investors, including a number of sovereign
funds, have taken the first move by partnering with successful local investors and
developers for investing in the Indian real estate market. Under such circumstances,
business gives right signals of growth & improvement and to avail of all such growth
opportunities. The Board, therefore, considers that the Company should be managed in
controlled manner.
OPPORTUNITIES
As India awaits policy reforms to pick up speed, your Company firmly believes that the
demand for Real Estate in a country like India should remain strong in the medium to long
term. Your Companys well accepted brand, contemporary architecture, well designed
projects in strategic locations, strong balance sheet and stable financial performance
even in testing times make it a preferred choice for customers and shareholders. Your
Company is ideally placed to further strengthen its development potential by acquiring new
land parcels.
SECTOR CONSOLIDATION
The highly fragmented Indian real estate sector has been in a prolonged consolidation
phase from the past few years and the pandemic has been one important factor pushing
weaker players out of business. The disruptions in the real estate sector have ensured
that no new player has an easy entry into the sector. As the sector moves towards fewer
big players in each region, consolidation presents a lucrative opportunity for the
existing real estate developers to cater to the rising housing demand.
AFFORDABLE HOUSING
Affordable housing continues to remain a significant opportunity for developers and key
focus area of the government. While the tax benefit for first-time homebuyers and tax
holiday for developers in affordable housing segment was rolled back in Budget 2022, we
believe it will not deter homebuyers decision of purchasing homes and demand will
continue to be strong in affordable housing segment. Interestingly, the share of launches
in the affordable segment across the top 7 cities of India, has dropped from 26% in CY2021
to 20% in CY2022, according to ANAROCK Research. The affordable housing segment could see
a meaningful uptick in demand with an expected economic recovery and rising income levels.
RISK AND CONCERNS
Factors like increased cement & steel cost, power cost; increase in labour cost and
transportation cost due to petrol/diesel price increase etc. could contribute to
inflation. The Company considers good corporate governance as a pre-requisite for meeting
the needs and aspiration of its shareholders. The main risk to the Company which may arise
is mainly due to Government policies and decisions, Fluctuations in prices of Raw
materials, Exchange rate fluctuations, Industry demand etc.
GOVERNMENT SPENDING:
In FY23, construction activity increased, driven by the central governments expanded
capital budget and increased activity by its public sector enterprises. The countrys
economic output is expected to grow by at least four times the amount of capex, according
to Indias capex multiplier estimate. States are collectively progressing well with their
investment plans, supported by a larger capital budget from the central government,
grants- in-aid for capital works, and interest-free loans repayable over 50 years.
The Indian governments emphasis in the last two budgets was on a strategic package
designed to stimulate private investment and address infrastructure gaps in the country.
This strategy involved crowding in private investment by divesting non-strategic PSEs and
idling public sector assets. Three factors support this strategy: the considerable
increase in budgets in FY23, robust direct tax revenue and GST collections, and the
resurgence of private sector investment since Q4 FY2022.
IMPACT OF CLIMATE CHANGE ON REAL ESTATE SECTOR
Buildings are the fourth highest emitters globally after power, transport and industry.
Global emissions from buildings increased from 2.91 Gt CO 2 in 2019 to 2.97 Gt CO 2 in
2022 8 . 11% of these GHG emissions result from manufacturing of raw materials of
hard-to-abate industries such as steel and cement. The remaining are from the on-site
emissions through electricity consumption, mainly for lighting and air conditioning.
Enormous emissions reduction potential remains untapped due to the continued use of fossil
fuel-based assets, lack of effective energy-efficiency policies and insufficient
investment in sustainable buildings.
CAUTIONARY STATEMENT:
The statements in this management discussion and analysis describing the outlook may be
"forward looking statement" within the meaning of applicable laws and
regulations. Actual result might differ substantially or materially from those expected
due to the developments that could affect the companys operations. The factors like
significant change in political and economic environment, tax laws, litigation,
technology, fluctuations in material cost etc. may deviate the outlook and result.
+91-9892691696
