MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Industrial Scenario
The year 2013-14 was not good for the real estate sector on account of weak macro
economic conditions in the country as well as the uncertainties related to general
elections. With the improvement in macro-economic conditions in the country, the real
estate sector is expected to attain a gradual recovery. Sales of residential units are
expected to pick up from the last quarter of FY 2014-15. As far as prices are concerned,
downside risk has reduced considerably in metro-cities and in case of Tier II and Tier III
cities, prices are likely to increase. The commercial sector volumes and prices are also
expected to pick-up, but with a lag of one or two quarters. The various proposals
announced in the manifesto of the new Government for this sector will aid in faster
recovery of the sector.
Review of Company’s operation
During the year ended 31st March 2014, the income decreased to Rs. 83,10,131/- as
compared to Rs. 7,12,11,135/- for the previous year in view of suspension of operations
due to regulatory requirements. The Company has incurred net loss for the year Rs.
1,70,14,015/- as compared to net loss of Rs. 28,74,184/- in the previous year.
Your Company has all the projects in Mumbai and in view of delay in approvals the year
in retrospect was subdued which impacted the business as also new projects showed a marked
delay in launching.
The Outlook
With a stable Government at the centre, there is now more optimism in the country. As
the new Government wants to focus on reviving growth, the interest rates are expected to
decline in the near future. As per RBI data, the annual exposure of banks to home loans as
a percentage of total non-food credit portfolio has remained almost stagnant in the range
of 9.50% to 9.75% during FY 12 – FY 14 period. Deeper penetration of existing banks
as well as upcoming banks will increase the exposure to home loans. With rapid land and
infrastructure development as well as improved standard of living in Mumbai and Tier II
and Tier III cities, housing demand is likely to increase more. The Government’s
announcement to develop 100 smart cities will also provide new opportunities for the real
estate sector.
Prevailing uncertainties on the global market the sentiments will remain cautious over
the short term. Overall macro-economic conditions will keep investor sentiments at
cautious levels, both in terms of FDI and FII. FDI inflows, which are currently muted
because of the slowdown in the country’s GDP growth rate, will probably remain
sluggish over the short term. However, as the Indian economy improve, foreign investors
will gain confidence and India will become attractive among competing investment
destinations.
Meanwhile, developers will continue to tackle the current liquidity crunch due to high
interest rates and slow sales. We will see a slowdown in construction activity for the
time being. However, as approval process improves, improving construction and sales will
benefit developers who will focus on execution of their on-going project portfolios.
Opportunities
There is a huge housing shortage in mid-income and low-income group categories. The
Government’s announcement to develop 100 smart cities will also provide new
opportunities for the real estate sector. Even the new Government has a mandate of housing
for all and in order to achieve this, it has allocated funds for cheaper credit to low
cost housing. Such incentives for affordable housing projects will encourage more and more
developers to undertake affordable housing projects. As far as prices are concerned,
downside risk has reduced considerably in metro-cities and in case of Tier II and Tier III
cities, prices are likely to increase, with the expected recovery in volumes. The
commercial sector volumes and prices are also expected to pick-up, but with a lag of one
or two quarters.
The Real Estate (Regulation and Development) Bill, 2013, which will help both the
developers and the buyers by instituting transparency and accountability, has been
initiated. In this backdrop, the various measures undertaken by the new Government to give
a boost to the real estate sector are likely to be seen. The Securities and Exchange Board
of India issued draft regulations for Real Estate Investment Trusts (REITs) in October
2013. REITs will provide a new funding option for the developers, investors will get
access to income-generating real estate assets and there will be transparency in terms of
pricing.
The improvement in macro-economic conditions in the country, the real estate sector is
expected to attain a gradual recovery. The various proposals announced in the manifesto of
new Government for this sector as well as the finalization of various policy initiatives
taken for this sector will aid in faster recovery of the sector.
Transport projects viz. metro rail, etc will give boost to the real estate and your
Company is also attempting for the benefit.
The real estate scenario in Mumbai has grown by leaps and bound over the past few years
with top notch investors across the world flocking the city to invest in various
residential and commercial properties. It seems that everyone wants a piece of this city
for themselves.
Threats
The year 2013-14 was not good for the real estate sector on account of weak macro
economic conditions and lower confidence levels in the country. Rising inflation combined
with high borrowing rates as well as slow growth in income and job levels impacted the
consumer spending. Continuance of these issues and the uncertainties related to general
elections resulted in continuance of low consumer confidence. Banks’ reluctance to
lend to the sluggish real estate sector and drying up of other sources of finance such as
FDI and PE investments resulted in increase in cost of debt for the developers. On one
hand, there was a steep hike in EMIs that the buyers had to bear and on the other hand
there was an increase in costs of construction and debt for the developers.
High cost of borrowing has been a cause of concern for the developers. Granting of
"industry status" to the real estate sector will help in quicker and cheaper
financing for the developers.
On account of the subdued sentiment in FY 2013-14 and the cautious sentiment in
Q1FY14-15, housing absorption showed negative growth and this resulted in high inventory
levels.
Inventory levels have remained high in most of the key cities, with Mumbai market
having one of the highest inventory levels. Burdened with the high inventory, developers
offered various discounts and incentive schemes to increase the sales and there was a
correction in prices in most of the cities. Commercial real estate was also affected
during this period. The vacancy rates have increased and the rental prices have remained
stable /reduced in most of the cities.
The real estate market in Mumbai has for long complained about the slow process of
approvals. There are multiple no - objection certificates that are required from the
environment ministry, CRZ, high – rise Committee and the municipal corporation to
clear a project plan and the process are tedious. Approvals have been slow since the last
2-3 years, which is not infusing any new construction activity and fresh supply in the
market.
Inflationary pressures, rising commodity prices and material costs are the cause of
concern, however, RBI and other authorities are taking appropriate measures to curb the
inflation.
Risk Mitigation
The Company is committed to delivery of projects in a timely manner. The progress on
our key business parameters continues at a reasonable pace, The Company continues to
consolidate its position in the right growth path by avoiding project delay where ever
possible and curtail / control on costs while it will take some time to get momentum
considering current situation. The company has a strong management team with significant
experience, knowledge and execution capability.
Internal Control System and their adequacy
The Company has a policy of reviewing and if necessary, revising its systems and
procedure to ensure controls at appropriate levels. All operating parameters are
periodically monitored and strengthened.
Review of internal audit system and compliance of the accounting standards prescribed
by the Institute of Chartered Accountants of India by an independent audit committee.
Generation of periodic management reports to monitor the statutory and other compliance.
The management continuously reviews the internal control systems and procedures for the
efficient conduct of the Company’s business. The Company adheres to the prescribed
guidelines with respect to the transactions, financial reporting and ensures that all its
assets are safeguarded and protected against losses. Internal Control Systems are
implemented to safeguard the Company’s assets from loss or damage, to keep constant
check on the cost structure, to prevent revenue leakages, to provide adequate financial
and accounting controls and implement accounting standards.
Human Resources and Industrial Relations
Human beings are the most important assets of any organization. HR policies play
important role in the growth of an organization. The Company always endeavours to keep
work place and working environment cheerful. The Company has implemented various welfare
schemes statutorily or voluntarily such as accident / health insurance medical check-up,
free hygienic labour camp with all facilities, free food at work place and it follows good
HR practices.
It is true that organization maintains its most valued assets not only by offering
handsome compensation, but by appreciation. The Company offers an environment where
employees feel they are listened, recognized and appreciated.
Training is another important factor. To upgrade the knowledge of the employees and
motivate them, the Company arranges training programmes on periodic basis covering areas
such as team work, motivation, leadership development, soft skill development, health and
many more. Industrial Relations continued to be cordial during the year resulting in
constant co-operation by all the employees in day-to-day work and implementing policies of
the Company.
Cautionary Statement
Certain statements in the Management Discussion and Analysis Report relating to the
Companys objectives, projections, outlook, expectations, estimates, etc. may constitute
forward looking statements within the meaning of applicable laws and regulations. Actual
results may differ from such expectations, projections, etc. whether express or implied.
Several factors could make significant difference to the Companys operations. These
include climatic conditions and economic conditions affecting demand and supply,
government regulations and taxation, natural calamities, etc. over which Company does not
have any control.
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