Ansal Housing Ltd Management Discussions

ECONOMIC OVERVIEW

1) Global Economy

The global economy remains remarkably resilient, with growth holding steady as inflation returns to target. The journey has been eventful, starting with supply-chain disruptions in the aftermath of the pandemic, a Russian-initiated war on Ukraine that triggered a global energy and food crisis, and a considerable surge in inflation, followed by a globally synchronized monetary policy tightening. Yet, despite many gloomy predictions, the world avoided a recession, the banking system proved largely resilient, and major emerging market economies did not suffer sudden stops. Moreover, the inflation surge despite its severity and the associated cost-of living crisis did not trigger uncontrolled wage-price spirals. Instead, almost as quickly as global inflation went up, it has been coming down.

Markets reacted exuberantly to the prospect of central banks exiting from tight monetary policy. Financial conditions eased, equity valuations soared, capital flows to most emerging market economies excluding China have been buoyant, and some low-income countries and frontier economies regained market access.

2) Indian Economy

Indias economy has been notably resilient amidst the past years global inflation and supply chain constraints, boasting an impressive growth rate of 7.8% in the 2023-24 fiscal year (FY) and exceeding the average G20 rate of 3.4%. Strong growth in the manufacturing sector, higher-than-expected agricultural output, and robust government spending have made India the worlds fastest-growing major economy.

However, according to the OECDs latest figures, Indias economic growth is projected to slow to 6.6% in FY 2024-25, as global demand weakens and a tighter monetary policy takes shape to manage global inflationary pressures. With inflation and monetary policy expected to ease in the second half of 2024, the Paris-based think tank forecasts that

Indias growth rate will remain at 6.6% in FY 2025-26. Although these figures are above the G20 average of 3.1% in both 2024 and 2025, they fall short of the Indian governments target of 7% to 7.5% by 2030.

It now appears very likely that the Indian economy will achieve a growth rate at or above 7% for FY24, and some predict it will achieve another year of 7% real growth in FY25 as well. If the prognosis for FY25 turns out to be right, that will mark the fourth year post-pandemic that the Indian economy will have grown at or over 7 per cent. That would be an impressive achievement, testifying to the resilience and potential of the Indian economy. It augurs well for the future.

INDUSTRY OVERVIEW Real Estate Sector

The Indian Real Estate sector witnessed a strong growth in the past couple of years and is poised for an assuring growth in the future. The outlook is driven by a confluence of multiple factors including increasing urbanization, shifting demographics, aspirational lifestyle and supportive economic growth in the country.

According to industry forecasts, the Indian real estate market will maintain its upward swing in the next few years, driven by the promise of the exponential growth the sector has seen in recent times. This remarkable success has made real estate a significant contributor to Indias GDP, increasing employment opportunities across multiple industries.

The Indian population now comprises a large demographic of young individuals and a growing middle class with rising income levels, which has led to a surge in demand for residential properties. While affordable housing is in massive demand in Tier-II and Tier-III cities, there is a greater demand for high-end, luxury properties in top cities like Mumbai, Bengaluru, Delhi, etc. Apart from residential developments, commercial real estate in India has also witnessed a rising demand due to the emergence of new businesses and multinational corporations nationwide.

Real estate developers have been taking up projects to cater to different budgets and efficiently satisfy the consumers ever-evolving needs. Although Indias steady economic growth, rapid urbanisation and favourable government policies have made its real estate market highly conducive for investment, it faces particular challenges too. These may include issues with land acquisition, navigating the complex regulatory environment, market fluctuations, and more.

Industry structure and developments

The real estate sector is one of the most globally recognized sectors. It is a beneficiary as well as a contributor to Indias economic growth. The Real Estate Industry in India Market size is estimated at USD 0.33 trillion in 2024, and is expected to reach USD 1.04 trillion by 2029, growing at a CAGR of 25.60% during the forecast period (2024-2029). Over the years, the sector has witnessed both periods of rapid growth and challenges. The sector experienced a boom in the early 2000s, driven by factors such as urbanization, rising disposable incomes, and easier access to home loans. However, the sector then faced several issues and hurdles due to regulatory and legal complexities, lack of transparency, delayed project deliveries, and some instances of fraudulent practices affected the sectors credibility. The introduction of the Real Estate (Regulation and Development) Act, 2016 (RERA) brought about significant reforms to address these challenges faced by the sector. However, economic slowdown, liquidity crunches and pandemic continued to have an overhang on the market dynamics. As the economy rebounded with effects of the pandemic waning, the sector rebounded and is now growing at a fast momentum. Some of the major investments and developments in this sector are as follows:

• The sale of luxury homes in India increased by 130% in the first half of 2023 compared to the corresponding period of the previous year. Between January-June 2023, 6,900 luxury homes costing

4 crore (US$ 488,011.96) and above were sold, as opposed to 3,000 in 2022.

• In Indias top eight cities, housing prices rose 7% year-over-year due to strong housing demand supported by persistent purchaser demand and steady borrowing rates.

• In July 2023, Delhi-NCR emerged as the third biggest city in the Asia Pacific in having flexible office space stock beating Beijing and Seoul, while Bengaluru retained the top spot, according to real estate consultant CBRE.

• In FY23, Delhi-NCR received 32% of the total private equity (PE) investment in the real estate sector.

• Indias flexible space stock was likely to expand by 10-15% YoY, from the current 36 million sq. ft., in the next three years, according to a report by CBRE.

• Real estate experts expect this positive trajectory of 2023 to continue in 2024. CBRE opines that the demand for mid-end and budget homes priced between INR 45 lakhs and INR 1 crore will persist, similar to the trends observed in the previous years. Similarly, the demand for premium and luxury projects priced between INR 2 and 4 crores and above will continue to grow steadily.

Another area which saw significant improvement is use of technology to enhance efficiency with renewed focus on design and incorporation of sustainable and green building concepts. With tools like Building Information Modeling (BIM), AI, drone tech etc., Real estate developers are bringing in higher efficiency into the development process, while improving their adherence to environmental norms. Indias robust macroeconomic fundamentals, including a large domestic market and a young, expanding workforce, contribute to its economic strength. The governments sustained focus on policies promoting manufacturing and innovation further enhances its growth potential. Domestic consumption remains a key driver and as the middle class expands and urbanization continues, the demand for homes is poised to rise.

The overview and outlook for different segments of the industry is given below: a) Residential Segment

The India Residential Real Estate Market size is estimated at USD 227.26 billion in 2024, and is expected to reach USD 687.27 billion by 2029, growing at a CAGR of 24.77% during the forecast period

(2024-2029). There is a massive demand for affordable housing in many parts of the country, propelled by rapid urbanization. Apart from it, there is a significant increase in demand for luxury and big housing spaces due to the need for better lifestyles.

Implementing initiatives that generate demand and encourage people to buy real estate propels the market forward. Ready-to-move-in apartments have been in high demand among buyers in the residential category. In these circumstances, however, educating customers better and managing expectations is critical. The trends that have been observed are revolutionary. In India, the real estate industry is undergoing a technological transformation. Throughout the industry, several cutting-edge strategies and solutions are being implemented. The markets growth trajectory has accelerated due to these new developments.

The surge in new residential supply can be attributed to the unwavering appetite for homeownership, with the demand for housing continuing to rise unabated. Consequently, leading and listed developers have ramped up their efforts to meet the demand for new residential properties. b) Retail Segment

The retail market is expected to double from present USD 790 billion by 2024. It is estimated that the organized retail constitute about 15% of the total retail space in India. Further Real estate sector in India is expected to reach a market size of US$ 1 trillion by 2030 from present US$ 790 billion and contribute 13 per cent of the countrys GDP by 2025. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. Commercial Segment has consolidated growth trajectory owing to improved business sentiments and rising growth prospects in the IT/ITES sector attributed to improving macro-economic dynamics and corporate expansion. Commercial real estate are also growing significantly, providing the much-needed infrastructure for Indias growing needs. While online shopping has threatened the retail sector, the market is adapting to the competition by offering malls and retail spaces that provide immersive experiences to attract consumers. These immersive experiences focus on delivering a complete package of leisure, entertainment, and dining options to patrons over mere product sales. c) Office Segment

The growing prominence of India as a global business hub has resulted in heightened demand for Grade A office spaces, particularly in key cities such as Mumbai, Bangalore and Delhi NCR. The influx of multinational corporations, startups, and technology firms has led to a surge in the need for modern office spaces that are well-equipped and come with amenities like co-working areas, conference rooms, and recreational facilities. Premium office locations command high rents and attract top-tier tenants, thus driving investment and development activity in this segment. Despite global uncertainties, the office segment is expected to remain positive on account of expansion by Global Capability Centres, reasonable advantages that India offers to global occupiers, in terms of skilled talent pool, competitive cost structures and occupiers driving their workforce to return to office.

BUSINESS/ FINANCIAL PERFORMANCE

The Companys business continues to exhibit robust performance. During the financial year 2023-24, the net revenue for the standalone entity increased to 38935.26 Lakhs from

22390.76 Lakhs in the previous year showing an increase of around 73.89% and the earnings before interest, tax, depreciation and amortization (EBITDA) increased to 7207.11 Lakhs from 4235.13 Lakhs in the previous financial year.

( in crores)

Particulars	FY 2023-24	FY 2022-23
Total income from operations	38935.26	22390.76
EBITDA	7207.11	4235.13
Profit before tax	533.33	(8072.71)
Profit after tax	375.41	(5719.10)

REVIEW OF OPERATIONS

The Company is mainly indulged in the activities related and associated with development and sale of residential real estate which include plotted developments, houses, villas and apartments of varying sizes and integrated townships and also the high end, luxury residential projects. Apart from these, the development business also includes certain commercial and shopping complexes, including the ones that are integral to the residential developments.

Details of significant changes in the Key Financial Ratios in comparison with the previous financial year alongwith detailed explanations for such changes:

Ratio	FY2023-24	FY2022-23	Percentage Variance	Explanation for Significant Change
Debtor Turnover Ratio	3.46	2.12	67.23%	During the year, few towers/ projects which were under construction/ development till last years are substantially completed resulting in sales of these towers/ projects being recognised for the first time as per INDAS115. As a result of this increased sales as compared to last year, the ratio has significantly improved in current year.
Inventory Turnover Ratio	0.22	0.10	125.75%	As the Company has recognised few towers/ project sales for the first time with substantial completion achieved in the respective projects, it indicates that the company is managing its projects effectively. The Company has achieved substantial completion resulting in inventory being recognised into the sales which is reflected in the betterment of the Inventory Turnover Ratio.
Interest Coverage Ratio	1.07	0.56	90.91%	The Interest Coverage Ratio has improved as compared to FY- 22-23 due to increase in profit before tax in current financial year. The Interest expense burden of the Company has comparatively reduced with settlement of ACRE ARC debt portfolio in the last year, the financial impact of this settlement is more visible in the current year. A better ratio reflects that company can cover its interest expense sufficiently.
Current Ratio	1.00	1.01	0.11%	No explanation required.
Debt Equity Ratio	3.55	3.75	-5.30%	No explanation required.
Operating Profit Margin	26.82	28.67	-6.43%	No explanation required.
Net Profit Margin	0.85%	-0.25%	-444.88%	The Net Profit Margin has improved on account of following reasons:
				1. Increase in Sales and EBIDTA in absolute terms.
				2. Reduction in Interest expense on account of settlement of one of the loan obligation in the last year, the financial impact of which is more visible in the current year.
Return on Net Worth	3.22%	-0.54%	-701.16%	The improvement in this ratio indicates that the company is effectively utilizing its available resources. The reasons for improvement is increase in PAT as compared to last year.

OPPORTUNITIES

Indias real estate sector is experiencing a resurgence, driven by various factors. The demand for residential properties has been buoyed by demographic trends, urbanization, and government initiatives. Housing sales in 2023 were estimated to have risen by 30% to a staggering 4.74 lakh units in the primary markets of top cities like Delhi-NCR, Mumbai Metropolitan Region, Chennai, Kolkata, Bengaluru, Hyderabad, and Pune. This represents an all-time high in both volume and value in the Indian housing market. Driven by higher ticket-size sales, the overall sales value of residential properties has scaled to an impressive 4.5 lakh crore. The real estate market in Delhi-NCR has witnessed several trends in recent years. With the growth of startups and the gig economy, there has been an increase in demand for flexible office spaces. Several factors contribute to the growth of the real estate market in Delhi-NCR. One of the significant drivers is the rapid urbanization of the region. As more people move to Delhi-NCR for work, the demand for housing and commercial properties increases. The experts in real estate sector have identified the following opportunities for the sector: a. Smart Cities Mission

The Smart Cities Mission is the Indian governments initiative to enhance citizens quality of life in participating cities and towns with the aid of digital and information technology, best practices, and public-private partnerships. The Union Ministry of Urban Development has collaborated with state governments to execute this mission to make cities more people-friendly and sustainable. Since housing is a crucial requirement for the growth of the Smart Cities Mission, these cities are likely to witness a proliferation of residential projects, providing ample investment opportunities. b. Housing Demand

The pandemic has encouraged a lot of fence-sitters to convert into first-time home buyers and existing ones to upgrade to larger homes by reestablishing the security that homeownership offers, resulting in rising housing demand across segments. An expected economic recovery along with the belief of housing prices bottoming out amongst consumers and rising income levels are some of the factors which will drive the housing demand going ahead. Hybrid working models will also continue to drive demand for larger homes. Employers are expected to continue to offer flexibility to their employees in order to attract and retain talent. c. Over-population

India is touted to be the most populous country by the year 2050. More than 50 per cent of people are urban centers and Tier 1 cities. To accommodate the population, India would require more new cities and urban centers on a mass scale in order to provide the required resources to the inhabitants. d. 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, the consolidation presents a lucrative opportunity for the existing real estate developers to cater to the rising housing demand. e. Digital Real Estate Sales

Over the past few years, digital marketing has emerged as an important tool for real estate developers to boost their sales and reach out to customers globally. While the earlier marketing activities were limited to building consumer experience and establishing connection through digital means, the pandemic has forced the developers to change their conventional sales models. Developers who have been able to migrate their sales process from on-boarding of customers to closing the deal online, have recorded healthy sales even during the lockdown. Digital collaboration tools can be leveraged by the developers to interact with potential customers, showcase project brochures, facilitate virtual site tours, and focus on NRIs to propel the sales. Going ahead, it will be imperative for the developers to adapt to a tech-savvy future in terms of digital platforms for sales and marketing and also introduce enhanced automation at sites. The Company strongly believes that the Real Estate Sector is bound to improve in long term. Your Company has managed well even during turbulent times due to its inherent strengths like a well-accepted brand, well-designed projects and trust among members, creditors and other financial institutions. Your Company is hopeful that the Real Estate Sector will improve in near future and the Company is looking forward to grab new opportunities by launching new projects particularly through collaboration route and ensure timely delivery of existing projects.

THREATS & CHALLENGES

The Company and the Indian Real Estate sector in general face a range of threats, risks, and concerns that require careful consideration. a. Funding and Financing Challenges

Most investors use housing or commercial property loans from banks or financial institutions to purchase property. However, access to financing and funding can be challenging if you are delving into real estate investments for the first time, have a low credit score, or wish to invest in unconventional projects. At the same time, trusted real estate developers can assist you in gauging different options for availing financing, thereby eliminating this challenge. b. Market Volatility and Risk Management

The prevalent economic conditions, market sentiment, policy changes, or other factors may cause real estate prices to fluctuate. Although the real estate market is not generally volatile, and price fluctuations are not frequent, adopting a few risk mitigation measures is essential to effectively balance your risk and reward. c. Regulatory Hurdles

Real estate sector is a highly regulated sector and any unfavorable changes in government policies and the regulatory environment can adversely impact the performance of the sector. There are substantial procedural delays with regards to land acquisition, land use, project launches and construction approvals. Retrospective policy changes and regulatory bottlenecks may impact profitability and affect the attractiveness of the sector and companies operating within the sector. d. Long Pending Infrastructure Projects

There are a lot of impending projects in the Indian real estate market starting from public sector projects to private sector housing colonies. There is a delay happening in the completion of these projects and the reason for this is that the project does not get enough funding or there is a lack of technology to complete these projects on time. Another big challenge in the Indian real estate sector is the protracted approval process because project approvals in India take about days to years because there is no option of a single-window clearance and it often results in time and cost escalations. e. Outdated Building Techniques

The Indian real estate sector is still dependent on old building techniques and hence they are over-dependent on extensive human labour for construction activities. Whereas, high-quality building materials such as concrete and iron slabs are used in new construction techniques. Therefore, today it is very important for developers to rely on modern building techniques which will help reduce construction time and labour cost and in that way the projects can be delivered fast. f. Monetary Tightening

There has been a contrasting trend in real estate lending over the past few years wherein reputed, low leveraged developers continued to enjoy easy access to liquidity as lenders remained selective and weaker developers struggled with limited sources of capital. Real estate sector performance is closely linked to economic recovery and its monetary policies. The Reserve Bank of India has so far maintained accommodative stance as it tries to support economic recovery. However, going ahead we expect to see monetary tightening as the central bank tries to control inflation in the country. A nascent economic recovery along with rising interest rates could impact the real estate sector in the near term as cost of housing loans shoots up with rise in the cost of funding for the developers, who are already facing margin pressure due to commodity cost inflation.

PROSPECTS & OUTLOOK

The Indian Real Estate sectors outlook for the year 2024 and near future is upbeat with strong demand from both Residential and Commercial segments driving healthy growth. As India charts its economic course in 2024, two sectors stand out as the primary engines of growth: real estate and infrastructure. The major reason for this is that the two components of a countrys growth are intricately interconnected, forming a symbiotic relationship that significantly influences urban development and economic advancement.

The demand and value of real estate, in turn, are profoundly influenced by the quality and accessibility of infrastructure. Well-developed transportation systems, such as highways, airports, and public transit, enhance the desirability of real estate, driving up property values in well-connected areas. Additionally, the availability of essential utilities and public amenities further adds to the attractiveness of real estate developments. Conversely, real estate development generates the need for expanded or improved infrastructure to support growing populations and evolving urban landscapes.

As per a recent NAREDCO report, the real estate sector is expected to grow at a compound annual growth rate (CAGR) of 18.7% between 2020 and 2030 with a projected market size of $1 trillion by 2030. Influenced by various factors like increased investments, government initiatives, and sustainability measures, real estate and infrastructure are together poised to stand out as the major contributors to the Indian economy.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place adequate internal control systems and procedures commensurate with the size and nature of business. These procedures are designed to ensure the following:

• Effective & adequate internal control environment is maintained across the Company.

• All assets and resources are acquired economically, used efficiently and are adequately protected.

• Significant financial, managerial and operating information is accurate, reliable and is provided timely; and;

• All internal policies and statutory guidelines are complied with.

The effective implementation and independent monitoring of internal controls and processes is done by the Internal Audit. The Audit Committee of the Board reviews the Internal Audit findings and provides guidance on internal controls. It ensures that Internal Audit recommendations are effectively implemented. The Audit Committee of the Company met four times during the financial year 2023-24. It reviewed, inter-alia, the adequacy and effectiveness of the Internal Control Systems and monitored implementation of Internal Audit recommendations and overlooked other financial disclosures. During the year under review, no material or serious observation has been received from the Internal Auditors of the Company for inefficiency or inadequacy of such controls.

RISKS AND CONCERNS

The management of the company is well aware about the major risks and threats posed to the industry in which the Company operates viz., economic, regulatory, taxation and environmental risks and also the investment outlook and strategy that prevails in the Indian Real estate sector. The risks that may impact the normal functioning of operations of the Company and its potential for future developments may include Market risk, Inflation risk, liquidity risk, counter-party risk, commodity risk and credit risk etc. The Audit Committee and the Board of Directors of the Company have been implementing proper and appropriate risk management policies and guidelines in order to develop a proper base for tolerance of risk. The Company has developed a proper framework and process for monitoring of the exposures to risks and to implement the measures in timely and effective manner. Also, it is constantly reviewed by the management for further development and improvement. The Company also has a very strong in-house Legal Department to take care of Legal and Regulatory Risks in routine. The requisite insurance covers are also taken by the Company for covering the disasters etc.

HUMAN RESOURCES

Human Resource asset is the most important factor for the Companys business operations and its growth. The main focus continues to be on the development of key talent, working closely with our outsourced partners in various areas of our operations and ensuring optimum utilization of manpower in coordination with the Companys business strategy. The company conducts consultations, dialogues, deliberations, negotiations and meetings in a congenial environment and arrives at amicable solutions to issues that crop up from time to time. Our Reward & Recognition/ incentive programme continues to strive to build culture of meritocracy and strengthen alignment of performance and reward.

As on 31st March, 2024, the Companys "on rolls" talent pool comprised of 197 employees.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis contain certain forward looking statements within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downward trend in the real estate development industry, rise in input costs and significant changes in political and economic environment, environment standards, tax laws, litigation and labour relations etc. The shareholders and readers are cautioned that in the case of data and information external to the Company, no representation is made on its accuracy or comprehensiveness though the same are based on sources thought to be reliable.