Ajmera Realty & Infra India Ltd Management Discussions.

Global Economy

As reported by the International Monetary Fund (IMF) in April 2019, the global economy grew at 3.6% in 2018. The growth momentum was sustained in the rst half of 2018, buoyed by a strong scal expansion in the US. The improvement was also driven by accelerating growth in developed economies, a steady performance in East Asia and recovery from recession in several developing and transitioning economies.

However, the economic expansion gradually softened during the year, with financial market volatility and economic policy uncertainty. The latter half witnessed widespread slowdown flowing to the US-China trade tensions, credit tightening in China, economic turmoil in Argentina and Turkey. Further, weakness in Germanys auto sector, uctuating crude oil prices and higher interest rates added to the sluggish growth. Industrial production decelerated particularly for capital goods with weakened global trade from its peak in late 2017. Consumer price in ation remained muted across advanced economies, given the drop-in commodity prices.

Reflecting the slowdown in activity, IMF has projected global growth to moderate from 3.6% in 2018 to 3.3% in 2019. In the US, growth is expected to decline to 2.3% in 2019 with the unwinding of scal stimulus. Growth in the Euro area is set to tick down from 1.8% in 2018 to 1.3% in 2019. While emerging market and developing economy group is expected to grow at 4.4% in 2019. However, with accommodative stance by major central banks globally, the global economy is expected to recover from second half of 2019.

Indian Economy

India continued with its recognition of ‘worlds fastest growing economy for second year in a row. The Indian economy recorded a growth rate of 6.8% during 2018-19 compared to 6.7% in the previous scal. The rst half of the year displayed an impressive growth rate with steady investments and robust private consumption along with important structural reforms. (Source: The Economic Times)

However, the growth momentum moderated in the second half flowing to declining manufacturing activities, high crude oil prices, rising interest rates, rupee depreciation, weak global and domestic demand and notable slowdown across major economies globally. The liquidity crunch in the financial services sector further added to the weakening activity as it affected consumption finance. The Government took Significant steps to strengthen liquidity situation in the financial system. With accelerated resolution of nonperforming assets under a simpli ed bankruptcy framework, it also improved financial sector balance sheets.

Industrial production for FY 2018-19 grew at 3.6%, lower than the growth of 4.4% in the previous scal. On a year-on-year basis, the eight core industries displayed a steady growth at 4.3% in FY 2018-19 as compared to the previous year. The real estate sector faced challenges in adapting to a rapidly changing regulatory environment with implementation of Real Estate Regulatory Authority (RERA) Act and Goods and Service Tax (GST) in the previous two years. The liquidity tightening impacted the pace of infrastructure and construction activity in the country.

Meanwhile, Indias GDP growth is estimated at 7% in 2019, underpinned by robust private consumption, a gradually more supportive scal stance and Benefits from previous reforms (Source: The Economic Times). However, volatile crude oil prices, weaker currency and sluggish domestic demand may hamper the growth expectations in the future.

Real Estate Industry

Real estate is a key sector of the Indian economy, contributing 6-7% to the GDP. In addition, the sector employs over 52 million workforce and is expected to generate over 15 million jobs over the next five years. The Indian real estate market comprises four sub sectors: commercial, residential, retail and hospitality. The growth of the sector is well complemented by the growth of corporate environment and demand for Office space as well as urban and semi-urban accommodations. The central and state Governments have introduced affordable/mid-income and rural housing schemes that are aimed at improving real estate activity.

Key policies by the Government

Union Budget 2019 has introduced several provisions pertaining to the real estate sector. These include:

1. For making more homes available under affordable housing, the Benefits under Section 80-IBA of the Income Tax Act is being extended for one more year, i.e. to the housing projects approved till March 31, 2020. Tax Benefit to builders on unsold inventory has been increased to two years. For buyers, Benefits under section 80-IB have been extended to one more year, i.e. till March 2020. (Source: Business Today)

2. Proposed extension of the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed.

3. Currently, income tax on notional rent is payable if one has more than one self-occupied house. Considering the dif culty of the middle class having to maintain families at two locations on account of their job, childrens education, care of parents etc., Government proposed to exempt levy of income tax on notional rent on a second self-occupied house.

4. The Benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a taxpayer having capital gains up to र 2 crore. This Benefit can be availed once in a lifetime.

5. The TDS threshold for deduction of tax on rent is proposed to be increased from र1,80,000 to र 2,40,000 for providing relief to small taxpayers.

(Source: ET Realty)

Real Estate Investment Trust (REIT)

REITs are investment vehicles that flown, operate and manage a portfolio of income-generating properties for regular returns. It pools funds from a number of investors and invests them in rent generating properties. The Securities and Exchange Board of India (SEBI) requires Indian REITs to be listed on exchanges and to make an initial public offer to raise money.

The Indian commercial real estate market is estimated to provide 294 million sq. ft. of REITable space from the existing Office stock, according to JLLs report. It also speci es that these REITable assets would be valued at US$ 35 billion. The increasing transparency, progressive regulations and a robust commercial real estate market in the country have made this segment a favourite among institutional investors. In the Office space amount allocated by investors is nearly US$ 17 billion in the form of direct investments as well as through entity level investments from 2006 to 2019.

Also, the rst REIT in India has gone live and reaped good response. REITs will be key drivers for the commercial segment, as these will provide an exit opportunity for investors, ensuring continued investor interest in the sector.

Goods and services tax (GST)

With an intention to replace multiple levels of taxation, GST was implemented in 2017. It has organised the taxation structure of the real estate segment. To boost the demand in the sector, the GST Council, further slashed tax rates. The GST Council in March 2019 allowed real estate developers an option to choose between the old tax rates and the new ones for under-construction residential projects to help resolve ITC (input credit tax) issues.

The developers opting for new tax rates will have to pay 1% GST on the construction of affordable houses and 5% on other housing projects without ITC. Builders opting for old rates will be paying 8% GST on affordable housing and 12% on other housing projects with ITC. Additionally, a condition has also been imposed that 80% procurement by developers should be from registered dealers to avail the Benefits under the composition scheme. If the norms are not followed, they would have to pay tax at 18%. Also, if the cement is purchased from an unregistered entity it would attract a tax of 28%.

The rate cut for under-construction property from 12% to 5% (without) input tax credit will help reduce price for high-end properties and lend sentiment boost to lift demand for under-construction projects. Lower GST rates and infrastructure status to affordable housing from the Government have stoked up the demand further. The reduced prices have boosted the housing sales to 6% in eight major cities. (Source: Business Line)

GST on premium, non-affordable housing projects

Rate till March 31, 2019 Rate from April 1, 2019
GST rates 12% 5%
With ITC Without ITC

GST on affordable housing projects

Rate till Jan 2018 Rate till March 31, 2019 Rate from April 1, 2019
GST Rates 12% 8% 1%
With ITC With ITC Without ITC

Real Estate Regulation and Development Act (RERA)

The Indian realty entered a new archetype with the implementation of RERA Act, 2016. It proved to be a path-breaking law by reviving buyers con dence and making developers cautious in the short term.

Under RERA, developers are required to le all the data regarding their projects, all approvals must be in place and the funds are kept in a separate escrow account so that there is no diversion of money. Hence, domestic and foreign investments have increased as investors are viewing the Indian real estate with a revived vigour led by increased transparency and credibility. The unorganised players are also consolidating as they are struggling to comply with strict norms under RERA. Thus, making it clear that only those who conduct their business transparently will survive in future. These steps will Benefit the buyers by assuring them of a quality product within the specified timelines.

Further, funding from banks are also improving as they are becoming more con dent to lend to RERA approved projects. The bank funding to developers is up by 6.3% over the previous year, with outstanding loans to the sector at र 1,87,200 crores at the end of August 31, 2018. The loans had witnessed a de-growth of 3.1% at the same time previous year (Source: DNA India).

Impact of the Liquidity Crisis

The liquidity tightening in the second half of 2018, which restricted sales, particularly in Mumbai and NCR. The financial sector crisis was the result of an asset-liability mismatch by NBFCs, which led to a decline in funding from banks. NBFCs and HFCs changed their asset portfolio mix with a higher share of long-term lending to builders against projects where the sources of fund remained short-term instruments largely. As a result, the liquidity crisis led NBFCs to delay payments of sanctioned loans thereby stranding projects under construction. Further, the cost of funding increased the borrowing rates for developers by 100-150 bps, which increased the developers debt burden and led to a rise in overall systemic debt to real estate. As per the RBI, NBFCs exposure to the real estate sector has more than quadrupled from र 0.4 trillion in FY 2010 to over र2.2 trillion in FY 2018. From FY 2016 to FY 2017 alone, NBFC credit to commercial real estate jumped from र 566 billion to र 958 billion.

It can be said that, the NBFC crisis did impact the real estate sector, though selectively and the most challenging phase of the crisis seems to now be over led by the liquidity infusion by the Government. Hence, NBFCs and real estate sector both are on its way towards a steady recovery.

Real Estate Outlook: A year ahead with opportunities and challenges

Over the past few years, real estate sector has become a preferred asset class for investments. India is among the top ten price appreciating housing markets internationally. Demand for residential properties has scaled up due to increased urbanisation and rising household income. Growing requirements of space from education and healthcare, e-commerce and logistics sectors have added to the prospects.

The commercial space is expected to remain the most buoyant force in the sector. Growing demand for Grade A Office spaces across major cities, including new sectors like co-working spaces that is further expected to push the demand for commercial properties. The governments push towards promoting start-ups and developing smart cities will create a lucrative environment for businesses to expand

A massive thrust on infrastructure by the Government, including Significant capital expenditure for roads, railways, development of smaller airports and expansion of schools and hospitals at the outskirts will Benefit this segment further.

The stringent measures enforced by RERA act has erased out non-serious players. It has allowed only credible developers with proven track record to drive the market, both organically and via consolidation. Driven by increasing transparency, accountability and returns, private investments in the sector have surged. The Real Estate Investment Trusts (REIT) listings in 2019 will further infuse liquidity in commercial real estate by fuelling demand for Office space.


Despite the easing situation, liquidity tightening in the system is still a concern for stakeholders in the sector. Further, 2019, being an election year might not substantially impact property prices but could slow down policy clearances and infrastructure projects critical to the sector. A stable government at the centre in 2019 will further boost the growth in the sector. While, oversupply in the mid and premium segments may still take time to narrow, the big areas of growth in realty will come from low-cost housing, smart cities and commercial segment. Overall, the real estate sector in India is expected to reach US$ 1 trillion by 2030 and will contribute 13% to the countrys GDP by the year 2025.

Residential Segment

The series of regulatory and business environment changes (GST, RERA, demonetization, NBFC liquidity crisis) didnt just disrupt the Indian residential real estate sector but changed its very dynamics. As per a recent Consumer Survey, 81% respondents which covers both resident and non-resident Indians (NRIs), believe that Indian real estate has become more credible and ef cient.

According to Knight Franks The Wealth Report, Delhi saw a drop in average prime property price by 2.3% in 2017. However, in 2018 the average prime property price witnessed a rise by 1.4%. Mumbai remained the most expensive prime residential city market, with prime property price seen at र 64,649 per sq.ft. in Q1 2019; this has seen a price increment of 0.3% when compared to average prime property price at र 64,432 per sq.ft. in 2018 . While Bengaluru witnessed 0.8% rise with average prime property price at र 19,296 per sq.ft. in 2018. In the rst quarter of 2019, prime property price of Bengaluru was seen at र 19,447 per sq.ft.

The total unsold inventory levels have improved at the end of 2018 and are estimated to be 4,68,372 units, which were lower by 1% since end of 2017 and close to 30% lower than 2016. The launches of new homes rose sharply by 76 per cent to 1,82,207 units in the eight cities. The rise in demand is flowing to sops in the interim budget, GST rate cuts and lowering of home loan rates post RBIs February repo rate cut. In the interim budget, the government announced various incentives for purchase of second homes.

Demand currently outstrips supply marginally, leading to reducing inventory levels. If near-term supply ramps up fast, it may lead to a halt in the recovery. Total debt at a systemic level for the sector is alarming and if it is not resolved soon, the sector may plunge into an abyss.

The affordable housing took centre-stage in residential real estate. Affordable housing, backed by a series of Government sops during 2018, kept the residential supply momentum ticking. In sharp contrast to earlier years where the ‘affordable tag was less preferred, 2018 saw almost every real estate developer regardless of market footprint and previous category orientations eager to take a bite out of the affordable housing pie. The growing demand from home buyers along with the incentives offered by the Government under Pradhan Mantri Awas Yojana (PMAY) pushed developers towards the affordable segment. Affordable housing, aided by subsidy on PMAY, has been a key phrase this year, giving customers various Benefits. During 2014-18, 1.53 crore houses were built under the PMAY scheme. PMAY approved over 4 lakh houses, increasing the total number of houses sanctioned under this scheme to 72.5 lakh.

Company Overview

Incorporated in 1985, Ajmera Realty and Infra Limited (Ajmera) has over three decades of experience in providing the residential and rented commercial properties. The quality, innovative construction technology, comfort, aesthetic appeal and maximum value are few attributes that enrich the Company with the belief that people have entrusted in them. The Company creates values through varied presence and integrated approach. Ajmera enjoys strong presence in the cities like Mumbai, Bengaluru, Ahmedabad in India as well as in foreign countries such as Bahrain and UK.

Financial and Operations Review

The Company displayed a balanced financial and operating growth despite the economic slowdown during the FY 2018-19. Our total income increased by 18.21 % in FY 2018-19 to र 35,723.78 Lakhs against र 30,221.21 Lakhs in the previous year. EBIDTA

(Earnings before interest, tax, depreciation and amortisation) decreased to र 13214.30 Lakhs in FY 2018-19 from र 13,676.17 Lakhs in FY 2017-18. PAT (Profit after Tax) decreased from र 7,607.12 Lakhs in FY 2017-18 to र6,562.91 Lakhs in FY 2018-19.

(र in Lakhs)
Particulars March 31, 2019 March 31, 2018 Growth % over
March 2018
Advances 53,997.17 44,409.02 21.59%
Investments 13,417.12 11,728.85 14.39%
Others 89,383.38 76,137.51 17.40%
Total Assets 1,56,797.67 1,32,275.38 18.54%
Shareholders funds (inclusive of reserves) 55,824.12 50,446.80 10.66%
Deposits - - -
Borrowings 67,211.73 31,246.95 115.10%
Others 33,761.82 50,581.63 (33.25%)
Total Liabilities 1,56,797.67 1,32,275.38 18.54%

City-wise Project details:


The Company has Significant presence in Mumbai through its super luxury high rise property, Ajmera i-Land. The project promises a world of designer living with serene majesty of nature as well as the advantages of a world-class township. Located at Wadala, the project is highly interconnected and integrated new age living destination.

The project offers three Hi-rise towers, AEON, ZEON and TREON with calming views of the sprawling nature as well as the breath-taking cityscape. It has lavished lifestyle amenities within its complex as well as excellent connectivity and proximity to citys prominent work, leisure or entertainment destinations. Also, it has a sports academy within the vicinity for all age groups, township area with access to schools, open markets, Health centres, commercial hubs, recreational zones and leisure avenues. It is Mumbais only integrated township connected with the Monorail and Eastern Freeway. Our project Zeon has been delivered, Treon is nearing completion and given for t outs whereas AEON has received part OC.

We have plans for further development of 30 Acres of balance land at Wadala (including existing projects).


Ajmera Lugaano

Lugaano is located in the heart of North Bengaluru, at Yehlanka. The location is surrounded by 105 acres of lake. Higher altitude from the mean sea level makes it lush green and keeps the weather pleasant year-round. The 11 acres of land has lake view homes which offer all essential avenues of convenience. The project mainly caters to the mid income segment of housing. Also, it has great infrastructure, education and job opportunities in the outskirts of city with an excellent connectivity by road, rail and air. The road network to Yelahanka is one of the best in entire Bengaluru.

Ajmera Nucleus

The Company aspire to create joyful and wholesome experience for its customers. A passion for building the perfect living experience has resulted in our newest offering- ‘Nucleus. The Project is spread across approx. 5.5 acres of land with ef cient design and amenities. It consists of 2 & 3 BHK deluxe apartments that are strategically located close to key business destinations and travel points. Also, it is 360 connected to all the major parts of the city via Proposed Peripheral ring road and Nice road.


Ahmedabad is transforming into an urban landscape. It is also a house hunters dream destination. All these factors make it an attractive destination that contributes to the growth of real estate market. Further, the expansion of the Municipal Corporation limits, increasing connectivity, robust development of basic infrastructure and the growth of Ahmedabad as a commercial and industrial hub fuel the growth prospects.

Enigma and Casa Vyoma are the two iconic projects at Ahmedabad. Ajmera Enigma has been completed and Casa Vyomas phase 1 is delivered and phase 2s OC is expected soon. Ajmera Enigma has been completed and looks like a masterpiece. This project is attracting new investors to explore the world of royalty. The Casa Vyoma, spread across 6 acres of Vastrapur, is nearing possession.


The project is spread across approximately 1.2 million sq.ft which will be launched in the current financial year 2019-20 with all the necessary approvals in pipeline. Out of 67 acres of land, we are launching 7 acres of land in 1st Phase with a combination of Residential and Commercial complexes.

International Presence


Ajmera Realty & Infra India Limited is expanding internationally by investing in the prime location of London. The population in London is expected to rise and it being the commercial centre will increase the demand for houses with the increased transport links. We have identified number of growth areas and came up with five projects spread across the city. Our residential projects include Kingston, Hemel Hempstead, Southall, Bishops Avenue and Liver Pool.

The Company has selected Kingston area because of its pleasant and serene surroundings. The project is a joint venture between the Company and the local developer of United Kingdom (UK) through its wholly flowned subsidiary known as "Ajmera Corporation UK Limited". The Company plans to construct five complex houses which are in the initial stage of development, catering to Mid Income Segment in housing residential zones. These are small projects with low investments, high returns along with low gestation period.


The Company entered into a strategic joint venture with Kooheji Golden Gate (KGG) - flowned by Al Kooheji family who are deeply rooted in the Kingdom and widely respected. The collaboration will help Ajmera to spread its international presence in Bahrain.

Golden Gate project in Bahrain is a gateway to luxury living in Manamas newest prestige development. With 746 luxury apartments, two towers, 45 and 53 levels respectively, it will be the highest residential tower in the country. We had launched the project of 450 apartments in November, 2018 and out of that, we are happy to book sale of 178 apartments (40% sale) within 8 months. Our success in Golden Gate was a herculean effort by whole team to deliver one of the biggest concrete pour (3,600 cubic meter) of RAFT foundation within 62 working hours by 350 operators using 950 firmX Mix Trucks.

Over 140,000 square meters of built up space offers the buyers stunning views, a superior canal & seaside living experience. Located in the heart of Bahrain Bay, Golden Gate is just 15 minutes drive from the Bahrain International Airport. This landmark development will feature residential, commercial, retail, tourism, and public amenities, all cooled from an innovative and environmentally sound central facility.

Golden Gate represents an opportunity for well-appointed buyers with a desire to experience the very best in modern living. This ambitious undertaking has been nine years in the making and promises modern hospitality and world-class business centres.

Human Resource

The Company provides a work environment that encourages free expression of opinion, decision making and responsible execution of the task. We are committed to attract, retain and recognise talent. Being entrepreneurial in spirit, we encourage fresh minds and innovative ideas.

We believe that our integrated yet decentralised way of working provides our employees with the opportunity to develop leadership capabilities and business acumen. They gain valuable insights by balancing professional knowledge with perspectives learned through industry experience and customer relationships. As on March 31, 2019, the Company has a strong workforce of 412 employees across group. Effective training programmes, on-the-job opportunities, rewards and recognition help to encourage superior performance and a competitive mind-set.

Internal Control Systems and Risk Management Mechanism

The Company has proactive approach to manage and mitigate the risks. The Company commitment towards effective risk management is for the sustainable growth and creating value for stakeholders. The well drafted risk management framework, consistently enhances our ability to anticipate risks, take pre-emptive measures and respond with agility and con dence in managing them.

The Company believes that proactive risk management is a vital element for good corporate governance. Thus, helps in identifying the risk, exposure, potential impact, mitigation process, non-business risk among others. These risks are timely reviewed by the board and mitigations strategies are suggested to reduce the impact. All this will help the Company to achieve favourable results.

The Company has all the main processes laid out to assure timely feedback on completion of operational and strategic goals, compliance with policies, procedures, laws and regulations, safeguarding of asset and ef cient use of resource.

The Companys Internal Auditor reviews the effectiveness of internal control on a regular basis to avoid fraud or any other issue arising in the daily operational activities.

Cautionary Statement

Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.