Our Company is a reputed Punjab based company having its presence in the construction industry for more than one decade. Company has delivered a number of high-rise building Projects in Punjab which includes Residential Housing Projects and Commercial Building Projects. Our residential portfolio currently covers projects catering to customers across all income groups. We believe that we have established a successful track record in the real estate industry in Punjab by developing versatile projects through our focus on innovative architecture, strong project execution and quality construction.
Though the forecast was negative growth in the year 2023 in the global real estate market but it grew from $3694.47 billion in 2022 to $3976.18 billion in 2023 at a compound annual growth rate (CAGR) of 7.6%. The Russia-Ukraine war disrupted the chances of global economic recovery from the COVID-19 pandemic, at least in the short term but the industry showed an improved trend of growth despite the war.
Industry Overview in India
India was one of the fastest growing economies in the world. As we have already seen, the property market in India is poised to grow immensely in 2023 as well as in the years to come. According to reports, the period between 2023 and 2028, the sector will register a compound annual growth rate of 9.2%. Since work-from-home and hybrid models have already gained popularity, there is a growing tendency among customers to move away from the city and opt for larger homes in the suburbs. Yet another trend is the integration of living spaces and office spaces. Developers now offer dedicated office spaces in the clubhouse or as a separate space. In addition to this, they also offer provisions for home offices in individual units.
Although headline inflation is elevated, it is projected to decline to an average of 5.2% in FY 2023-24, amid easing global commodity prices and some moderation in domestic demand. The Reserve Bank of India has withdrawn accommodative measures to rein in inflation by hiking the policy interest rate. Indias financial sector also remains strong, buoyed by improvements in asset quality and robust private sector credit growth.
2023 proved to be a year of a new high for the Indian real estate market. Both, new launches and home sales saw a significant improvement in last year and has maintained the same momentum in 2023 as well. The real estate market in India has been tried and tested, and widely thought to be immune to the volatility in the market. Interestingly, the real estate market has stayed true to the expectations of real estate investors despite the number of ups and downs in the last couple of years. Fortunately, positive expectations and a rise in the momentum of growth have demonstrated the markets ability to persist and will continue to do so in 2023 and the upcoming years as well.
The real estate market in India offers something for every type of investor out there. Considering 2023, the general Indian economy shows encouraging indicators, including a rebound from the current stock market fall, a predicted increase in the creation of new employment opportunities, and an overall growth. These indicators will ultimately lead to a rise in the demand for housing societies in the country as more and more individuals step into the housing market.
Let us take a look at some of the top real estate trends in 2023 that are predicted to rule the real estate market:
The residential real estate market in India had shown astounding progress in 2023, a growth of 9.2% was registered on 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 2023, and the real estate market has set unprecedented benchmarks which continued its growth momentum from 2022 amid the global slowdown in the past years.
Financial Highlights of the Company:
(Rs. in Lakhs)
|Change in %
|Profit Before Interest and Depreciation
|Profit Before Depreciation
|Net Profit Before Tax
|Provision for Tax
|Net Profit After Tax
|NAME OF PROJECT
|Area of the Project
|NO. OF FLATS/SHOPS
|FLATS Booked/ SOLD
|% OF OCCUPATION
|AGI SMART HOMES
|AGI SKY GARDEN
|AGI Business Centre
|1887 Sq. Yds.
Projects under Completion:-
|Area of the Project
|NO. OF FLATS/PLOTS
|JALANDHAR HEIGHTS-2 Extension
|AGI Maxima (M2)
|AGI SKY VILLAS
SUCCESSFUL PROJECTS OF THE COMPANY
AGI SMART HOMES
AGI SKY GARDEN
AGI SKY VILLAS
AGI BUSSINESS CENTRE
OPPORTUNITIES AND CHALLENGES 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. Your company has also broken the geographical barrier by start of the project in Ludhiana City. Proposal to start projects in Mohali and New Chandigarh is also on the cards.
While the management of your Company is confident of creating and exploiting the opportunities, it also finds the following challenges:
- Unanticipated delays in project approvals;
- Availability of accomplished and trained labour force;
- Increased cost of manpower;
- Rising cost of construction;
- Growth in auxiliary infrastructure facilities; and
- Over regulated environment.
Your Company continues to capitalize on the market opportunities by leveraging its key strengths. These include:
1. Brand Reputation: Enjoys higher recall and influences the buying decision of the customer. Strong customer connects further results in higher premium realizations.
2. Execution: Possesses a successful track record of quality execution of projects with contemporary architecture.
3. Strong cash flows: Has built a business model that ensures continuous cash flows from their investment and development properties ensuring a steady cash flow even during the adverse business cycles.
4. Significant leveraging opportunity: Follows conservative debt practice coupled with enough cash balance which provides a significant leveraging opportunity for further expansions.
5. Outsourcing: Operates an outsourcing model of appointing renowned architects/contractors that allows scalability and emphasizes contemporary design and quality construction a key factor of success.
6. Transparency: Follows a strong culture of corporate governance and ensures transparency and high levels of business ethics.
7. Highly qualified execution team: Employs experienced, capable and highly qualified design and project management teams who oversee and execute all aspects of project development.
RISKS AND CONCERNS
Market price fluctuation
The performance of your Company may be affected by the sales and rental realizations of its projects. These prices are driven by prevailing market conditions, the nature and location of the projects, and other factors such as brand and reputation and the design of the projects. Your Company follows a prudent business model and tries to ensure steady cash flow even during adverse pricing scenario.
The volume of bookings depends on the ability to design projects that will meet customer preferences, getting various approvals in time, general market factors, project launch and customer trust in entering into sale agreements well in advance of handing over the possession of the projects. Your Company sells its projects in phases from the time it launches the project, based on the type and scale of the project and depending on market conditions
Execution depends on several factors which include labour availability, raw material prices, receipt of approvals and regulatory clearances, access to utilities such as electricity and water, weather conditions and the absence of contingencies such as litigation. Your Company manages the adversities with cautious approach, meticulous planning and by engaging established and reputed contractors. As your Company imports various materials, at times execution is also dependent upon timely shipment and clearance of the material.
The rental realizations on the space leased depends upon the project location, design, tenant mix (this is relevant in the case of shopping malls), prevailing economic conditions and competition. Your Company has set up its retail property in prime location and maintains a fresh ambience resulting in crowd pull and attracting first time kind of retailers. As far as the office space rentals are concerned, the same depends on demand and supply, general economic conditions, business confidence and competition.
Land/Development rights costs and availability
The cost of land forms a substantial part of the project cost. It includes amounts paid for freehold rights, leasehold rights, eligible FSI, construction cost of area given to landlords in consideration for development rights, registration and stamp duty. Your Company may acquire land/land development rights from the government and private parties. It ensures that the consideration paid for the land is as per the prevailing market conditions, reasonable and market timed. Your Company also enters into MOUs and makes advances for the land/land development rights prior to entering into definitive agreements. The ensuing negotiations may result in either a transaction for the acquisition of the land/land development rights or the Company.
The acquisition of land and development rights needs substantial capital outflow. Inadequate funding resources and high interest costs may impact regular business and operations. Your Company has always tried to build sufficient reserves resulting out of operating cash flows to take advantage of any land acquisition or development opportunity.
As we enter 2023, the momentum of historic sales but will remain strong to narrate a positive story. Unlike the past year, the real estate sector is now picking up with home buyers willing to make the move. With most workers displaced during the lockdown now back, construction activity has resumed and work is moving at a faster pace to fulfil commitments. The demand for residential property has in fact also been guided by the concept of work from home as families are now looking out for an upgrade as individual space becomes a crucial factor.
Strengthen relationships with key service providers and develop multiple vendors
In order to continue delivering landmark offerings to our customer, we shall further strengthen our relationship with our key service providers, i.e. architects, designer and contractors. Your Company is also working on strategy to develop more and more vendors who can deliver product and services in line with Companys philosophy and product offerings.
Internal Control Systems
The Company has also focused on upgrading the IT infrastructure both in terms of hardware and software. In addition to the existing ERP platform, the Company is presently reviewing the process documentation to ensure effectiveness of the controls in all the critical functional areas of the Company.
KEY FINANCIAL RATIO ANALYSIS
A comparative table showing synopsis of FY 2023 versus FY 2022 of Key Financial Ratio is provided below:
|Improved Due to better Debtor Management
|Ratio Improved due to increase in sales
|Interest Coverage Ratio
|Ratio improved because of Increase in Profit and Depreciation
|Due to increase in investments in Projects and Long Term Investments in land for future projects and increase in current Liabilities increased during year.
|Debt Equity Ratio
|Improved due to increase in profit
|Operating Profit Margin
|Increase due to increase in Profit
Statement in this Managements Discussion and Analysis detailing the Companys objectives, projections, estimates, expectations or predictions are “forward-looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied due to various risk factors and uncertainties. We are under no obligation to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events and assume no liability for any action taken by anyone on the basis of any information contained herein.
|Sukhdev Singh Khinda
|Whole Time Director