B-Right Real Management Discussions


Global Economy

Despite witnessing major challenges in 2022 Omicron, conflict between Russia and Ukraine, and extraordinary global monetary tightening the global economy did better than expected. The Euro area steered clear of deep economic contraction while the US economy remained more resilient than expected. Geopolitical tensions, trade disputes, and regional conflicts can have spill over effects on the global economy. Shifting alliances, trade policies, and geopolitical risks can impact investor confidence, supply chains, and cross-border investments. Global inflation touched an all-time high of >8% with many developed economies witnessing double digit inflation figures for the first time in many decades. This led the central banks across the globe to simultaneously hike interest rates in a bid to tame inflation. The global inflation rate is expected to decrease from 8.8% in 2022 (average) to 6.6% in 2023 and 4.3% in 2024. The inflation forecast for 2023 is 4.6% for advanced economies and 8.1% for emerging market and developing economies. Looking ahead, the global economy will remain fragile in the next fiscal. As per IMFs latest World Economic Outlook report (April 2023), global growth is expected to moderate to 2.8% in 2023 from an estimated 3.4% in 2022. The pandemic has accelerated digital transformation and technology adoption across sectors. Technological advancements in areas such as artificial intelligence, automation, and digital platforms can drive productivity gains, reshape industries, and create new opportunities for growth and innovation.

Indian Economy

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. The policies and reforms implemented by the Indian government play a crucial role in shaping the economy. Measures related to taxation, investment regulations, labour laws, infrastructure development, and ease of doing business can impact business sentiment, investment flows, and economic growth. Improving infrastructure is crucial for sustaining economic growth. Investments in transportation, power, telecommunications, and urban development can enhance productivity, attract investments, and promote regional development. Controlling inflation is an important aspect of managing the Indian economy. The Reserve Bank of India (RBI), the countrys central bank, formulates monetary policies to manage inflation and promote economic stability. Interest rates, liquidity measures, and credit availability are key tools used by the RBI to manage inflation and support growth.

Indias economy recovered quickly from the pandemic and further growth is expected to be supported by solid domestic demand and increase in capital investments. The International Monetary Fund (IMF) and Reserve Bank of India (RBI) estimate real GDP growth of 6.8% in 2022-23 and 6.1% in 2023-24. Maintaining fiscal discipline and managing public debt are essential for economic stability. Sound fiscal policies, effective budgetary management, and revenue generation efforts play a critical role in ensuring macroeconomic stability and long-term growth prospects.

Industry Overview

Real estate sector is one of the most recognized sectors globally. The growth of the corporate environment compliments the growth of the real estate sector.

Indias real estate sector is witnessing a healthy increase in demand in 2022 and this momentum is expected to hold for the rest of the year. From commercial spaces to the residential market, the overall market outlook is a bright one for the real estate industry. The real estate sector is going to continue on its journey of long-term growth as we see a continuous rise in GDP per capita, larger disposable incomes, growing urbanization and most of all a larger focus of the world on us as the next big economy.

Opportunities

? With considerable government policies, the discounts in the premiums offered will give a boost to the real estate developers and help them in speedy recovery of their activities. ? With the economy returning to normalcy and employees getting back to offices, there would be a gradual increase in demand for commercial offices spaces along with residential also. ? Both are parcels are well located to take the advantage of the positive trends in residential and commercial real estate. ? Digital marketing has emerged as an important tool for real estate developers for their sales and customer outreach. The marketing activities are not just limited to tap new customers or brand recognition, but establishing a personal touch through digital means. ? With tech-enabled tools to close real estate purchases online, developers have been able to record 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 sales. ? Many urban areas have underutilized or outdated properties that can be redeveloped to meet modern needs. Real estate developers can identify such properties and undertake redevelopment projects, transforming them into vibrant and attractive spaces that align with urban planning goals, sustainability principles, and community needs. ? Emerging tools such as virtual reality, augmented reality, AI - powered chatbots are being extensively used to establish personalized services with prospective customers. Going ahead, it will be imperative for developers to adapt to a tech-enabled future and the proportion of real estate business generated online is expected to only rise further.The consolidation of the industry presents a lucrative opportunity for the existing real estate developers to cater to rising housing demand.

Threats And Challenges

The real estate industry faces various threats and challenges that can impact its operations, profitability, and growth prospects. Here are threats and challenges: ? Economic recessions or downturns can significantly impact the real estate market. During these periods, demand for properties may decrease, leading to declining property values, increased vacancies, and reduced construction activity. Economic fluctuations can pose challenges for developers, investors, and property owners. ? Real estate markets can experience volatility due to factors such as changes in interest rates, housing supply and demand imbalances, and shifts in investor sentiment. Rapid changes in property prices and market conditions can make it challenging for buyers, sellers, and investors to make informed decisions. ? Availability of financing and mortgage rates can influence the real estate market. Tightening lending standards, higher interest rates, or limited mortgage options can reduce affordability and limit the number of qualified buyers, affecting property sales and demand. ? Regulatory changes at local, state, or national levels can impact real estate operations and investment strategies. These changes may include zoning regulations, building codes, tax policies, rent control measures, and environmental regulations. Real estate professionals must adapt to new requirements and ensure compliance, which can create additional costs and administrative burdens. ? Shifting demographics and evolving consumer preferences can pose challenges for real estate professionals. Changes in population growth, household sizes, age distributions, and lifestyle preferences can influence demand for certain types of properties and locations. Real estate professionals need to understand and adapt to these changing preferences to remain competitive. ? Technological advancements and digital disruption have transformed the real estate industry. Online platforms, virtual tours, blockchain technology, and automation have changed the way properties are marketed, transactions are conducted, and data is managed. Real estate professionals must embrace and leverage technology to stay competitive and meet evolving customer expectations. ? Environmental concerns and regulations impact real estate development and operations. Climate change, sustainability requirements, energy efficiency standards, and natural disaster risks can influence property values, insurance costs, and development decisions. Real estate professionals must consider these factors and incorporate sustainability practices into their strategies. ? Intense competition and oversupply of properties in specific markets can create challenges for real estate professionals. Oversupply can lead to price declines, increased vacancies, and longer marketing times. Developers and investors must carefully analyse market conditions and ensure their projects align with demand to avoid oversupply risks.

? Managing and maintaining properties can be a challenge, especially for large portfolios or diverse property types. Issues such as property damage, maintenance costs, tenant management, and regulatory compliance can impact profitability and operational efficiency. ? Rapid urbanization and inadequate infrastructure can strain real estate markets. The mismatch between housing demand and supply in urban areas can lead to affordability issues, congestion, and inadequate infrastructure development. Real estate professionals need to consider these factors when assessing investment opportunities.

Internal Control System

? Internal control systems are embedded in the processes across all functions in the Company. Thesesystems are being regularly reviewed and wherever necessary are modified or redesigned to ensurebetter efficiency and effectiveness.Companys internal control systems comprise management and internal control; financial, transaction and operational and compliance control; and internal audit.

? Financial Controls-

 

Segregation of duties: Ensuring that different individuals are responsible for initiating, authorizing, recording,and reconciling financial transactions to prevent fraudand errors.

 

Budgeting and forecasting: Developing and monitoring financial budgets, as well as conducting periodic forecasts to track performance and make informed decisions.

 

Financial reporting: Establishing processes to generate accurate and timely financial statements, including balance sheets, income statements, and cash flow statements.

 

Cash management: Implementing controls to manage cash flow, including cash receipts and disbursements, bank reconciliations, and cash position monitoring.

? Transaction and Operational Controls-

 

Property acquisition and sales: Establishing processes for due diligence, including property inspections, title searches, and legal documentation.

 

Lease and rental management:Implementing controls to track lease agreements, rent collection, and lease renewals or terminations.

 

Maintenance and repairs:Setting up procedures for managing property maintenance, repair requests, and vendor contracts.

 

Document management: Establishing systems to organize and securely store property-related documents, such as contracts, deeds, and tenant agreements.

? Compliance Controls-

 

Regulatory compliance: Ensuring adherence to applicable real estate laws, regulations, and licensing requirements.

 

Ethical standards: Establishing a code of conduct and promoting ethical behaviour among employees, including conflict of interest policies and anti-corruption measures.

 

Data protection and privacy: Implementing safeguards to protect sensitive data, including personally identifiable information (PII) of clients, tenants, and employees.

 

Internal audits: Conducting periodic internal audits to assess the effectiveness of controls, identify weaknesses, and recommend improvements.

Cautionary Statement

This management discussion and analysis contain forward looking statements that reflects your Companys current views with respect to future events and financial performance. Important factors that could make a difference to the Companys operations include labour and material availability, and prices, cyclical demand and pricing in the Companys principal markets, changes in government regulations, tax regimes, economic development within India and other incidental factors.