Country Condos Ltd Management Discussions

OVERVIEW:

The Real Estate Sector is one of the most globally recognized sectors. Its impact on the overall economy has been deepening over the past few years, mainly because of the rising population on the demand side and enhanced government initiatives as an enabler. The growth of this sector is well complemented by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

The Indian economy continued to exhibit steady growth and remained among the fastest growing emerging economies, with a focus on the continued implementation of structural and financial sector reforms and efforts to reduce public debt.

In India, real estate is the second largest employer after agriculture and is slated to grow at 30 percent over the next decade. It is also expected that this sector will incur more non-resident Indian (NRI) investments in both the short term and the long term. Bengaluru is expected to be the most favored property investment destination for NRIs, followed by Ahmedabad, Pune, Hyderabad, Chennai, Goa, Mumbai, Delhi and Dehradun.

ECONOMIC REVIEW:

GLOBAL ECONOMY:

In 2023, the global economy faced a complex scenario characterized by persistent inflation, geopolitical tensions, tightening monetary policies, and ongoing pandemic repercussions, all contributing to a decline in growth. According to the World Economic Output (WEO) update, global growth slowed from 3.5% in CY 2022 to 3.0% in CY 2023. Central Banks raised interest rates in CY 2023 to counter inflationary pressures. Despite challenges such as supply chain disruptions and elevated inflation, major economies received support from fiscal stimulus, monetary policies, trade agreements, international aid, green initiatives, and technological investments.

The International Monetary Fund (IMF) projects moderate and stable growth for CY 2024 & CY 2025 at 3.2%, albeit lower than the historical average of 3.1%. This expectation reflects sluggish economic activity, primarily attributed to a slowdown in advanced economies. The growth rate of these economies, which stood at 1.6% in CY 2023, is anticipated to remain sluggish at 1.7% to 1.8% over the next two years due to policy tightening, financial sector turmoil, high inflation, the ongoing conflict between Israel and Gaza, and the lingering effects of four years of the COVID pandemic.

The slow growth rate persists amidst a cost-of-living crisis triggered by disruptions in energy and food markets due to Russias conflict in Ukraine, coupled with global monetary tightening to address inflationary pressures and reduced fiscal support. However, the resilience seen in the United States and several significant emerging market economies, along with continued fiscal support in China, will bolster global growth.

Inflation rates are declining more rapidly than anticipated across most regions, supported by tight monetary policies. Combined with a modest uptick in economic activity, this sets the stage for a softer-than-expected economic slowdown.

In advanced economies, growth rates are forecasted to reach 1.7% in CY 2024, improving to 1.8% in CY 2025. The US demonstrates resilient consumption and investment, while Euro area activity is expected to remain sluggish. Among emerging markets and developing economies, growth is estimated at 4.2% in CY 2025. China faces challenges from its real estate crisis, tax hikes, spending cuts, and weakening confidence, yet it is anticipated to grow at 4.6% in CY 2024 due to increased government spending. India is set to maintain its position as the fastest-growing large economy, driven by robust domestic demand.

Global inflation is projected to decrease from an estimated 6.8% in CY 2023 to 5.9% in CY 2024 and further to 4.5% in 2025, primarily due to accelerated disinflation in advanced economies. Declining inflationary pressures vary by country but generally stem from reduced core inflation, influenced by ongoing tight monetary policies, softened labor markets, and impacts from lower energy prices. The IMF forecasts a 2.3% decline in oil prices in CY 2024, while non-fuel commodity prices are expected to drop by 0.9%. Heightened tensions in the Gaza-Israel region, which accounts for approximately 35% of global oil exports, could lead to supply shocks if the conflict escalates. Continued trade distortions and geopolitical fragmentation are anticipated to persist, exerting pressure on global trade levels.

The risks to global economic growth are balanced, with potential upside from quicker disinflation, slower withdrawal of fiscal support measures, robust economic expansion in China, and advancements in supply-side reforms. Conversely, downside risks include spikes in commodity prices due to geopolitical or weather-related disruptions, ongoing core inflation necessitating tighter monetary policies, potential slowdowns in Chinese growth, and potential disruptions from abrupt fiscal consolidations.

INDIAN ECONOMY:

In FY 2024, the Indian economy sustained its position as one of the fastest-growing major economies, outperforming several advanced and developing economies. Notwithstanding headwinds such as volatile commodity prices and disruptions in global trade due to worsening geopolitical conflicts in Europe and the Middle East, the Indian economy demonstrated resilience. Timely intervention by the Reserve Bank of India (RBI) and effective governmental initiatives ensured the inflation rate in India stood at 5.4% in the reported year.

The Indian economy continues to strengthen despite the global headwinds. As per the First Advance Estimates (FAE) released by the National Statistical Office (NSO), real Gross Domestic Product (GDP) is expected to grow by 7.3%, in FY 2023-24, underpinned by strong investment activity.

For FY 2024-25, growth, while still healthy, may see a moderation to 6.8%-7% as per various estimates due to high interest rates and lower fiscal impulse would temper demand and the net tax impact would normalize. Also, the uneven economic growth of some trading partners and escalation of geopolitical uncertainties can drag down exports.

Support will come from other areas. Household consumption is expected to improve as continued disinflation will prop up the purchasing power of consumers. Secondly, healthy rabi sowing and good kharif output assuming a normal monsoon will support agricultural income. Thirdly, prospects of fixed investment remain bright owing to an upturn in the private capex cycle, improved business sentiments, healthy balance sheets of corporates and banks as well as the governments continued thrust on capital expenditure. A sustained economic growth will lead India to become the 3^rd largest and an upper middle-income economy in years to come.

Improving the outlook for global trade and increasing integration in the global supply chain will support net external demand. Headwinds from geopolitical tensions, volatility in international financial markets and geoeconomic fragmentation, however, pose risks to the outlook. The Reserve Bank of India (RBI) has kept the Repo Rate unchanged since February 2023 to manage retail inflation within its target range, which has consistently stayed above the 4% mark. In July 2023, Consumer Price Index (CPI) inflation rose to 7.44%, the highest level seen since September 2022. The CPI has since eased and is hovering around 5%. The RBI anticipates a 4.5% inflation for FY 2025. Economists expect the RBI MPC to maintain the repo rate at 6.5%, marking the seventh consecutive unchanged rate. Indian banks, with approximately 70% of assets in floating-rate loans, face less exposure to interest rate risks compared to their global counterparts. This arrangement allows them to benefit from rising rates and reduces potential losses on bond holdings as interest rates climb.

The World Bank expects India to grow by 6.6% in FY 2024-25 after an estimated growth of 7.5% in the previous financial year.

On the strength of a flourishing service sector, growing domestic demand for consumer services and export demand for business services, as well as higher public investments, the Indian economy surpassed its global counterparts. According to the National Statistical Office, Indias GDP grew by 8.2% in FY 2024, as per the second estimate.

The timely and decisive monetary policy stance adopted by the Reserve Bank of India (RBI) through appropriate policy rates and liquidity measures have contributed to the economys robustness and resilience. Strong growth in economic activity has also imparted buoyancy to revenue collections in the country. In FY 2024, the gross GST collections was 20.18 Lakhs Crore, registering a growth of 11.7%. Over the last few years, public capex has been consciously pushed up, as evidenced by higher allocations for infrastructure development in successive budgets.

The Government has also been promoting schemes such as the Urban Infrastructure Development Fund (UIDF). This underscores the Indian governments focus on bolstering the infrastructure sector, which, in turn, will be a multiplier for the economic growth. Additionally, by rolling out housing schemes such as the PM Awas Yojana, the Government of India is assisting its citizens with affordable housing facilities. In FY 2024, the construction sector has clocked a growth rate of 10.7%. This expansion is likely to positively impact other allied sectors and further fuel the growth of the domestic economy.

Despite of war in Ukraine and the staggering inflation, the Indian equity market had a comparatively stellar year. The governments focus on infrastructure development with initiatives like the National Infrastructure Pipeline and Atmanirbhar Bharat Abhiyan are expected to create opportunities. However, the effects of geo-political tension rising around the world pose a threat to the economic growth of the Country and clouds of uncertainty are still hovering around World economic growth.

Under PM GatiShakti Master Plan, the National Highway Network will develop 25,000 Kilometers of new highways network which will be worth ¹ 20,000 Crore (US$ 2.67 billion). Increased government expenditure is expected to attract private investments, with a production-linked incentive scheme providing excellent opportunities. Consistently proactive, graded and measured policy support is anticipated to boost the Indian economy.

A number of sectors in India - real estate, steel, cement, home building products and consumer durables, among others -reported unprecedented growth. Real estate sector in India is expected to reach US$ 1 trillion in market size by 2030, up from US$ 200 billion in 2023 and contribute 13% to the countrys GDP by 2025. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for Indias growing needs.

Although the short-term outlook appears challenging due to rising interest rates, external supply shocks, and geopolitical tensions, we believe the government is taking appropriate measures to ensure a sustainable growth trajectory for the country. The union budget presented this year strongly supports the long-term growth of Indias real estate sector through its focus on urban infrastructure and the digital economy. The governments significantly expanded capital expenditure target for the year is expected to generate job opportunities and stimulate higher economic activity.

INDUSTRY REVIEW:

The real estate sector is one of the most globally recognized sectors. The real estate sector comprises four sub sectors - housing, retail, hospitality and commercial. The growth of this sector is well complemented by the growth of 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.

The residential real estate market in India had astounding progress in 2024, setting new sales records of 68% year on year, further demonstrating the industrys prominence as one of Indias fastest growing industries.

In 2014, the Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform, which has allowed all kind of investors to invest in the Indian real estate market. It would create an opportunity worth 1.25 trillion (US$ 19.65 billion) in the Indian market in the coming years. Responding to an increasingly well-informed consumer base and bearing in mind the aspect of globalization, Indian real estate developers have shifted gears and accepted fresh challenges. The most marked change has been the shift from family-owned businesses to that of professionally managed ones. Real estate developers, in meeting the growing need for managing multiple projects across cities, are also investing in centralized processes to source material and organise manpower and hiring qualified professionals in areas like project management, architecture and engineering.

Residential real estate in the countrys top seven property markets has staged a comeback with sales exceeding prepandemic levels, driven by record-low interest rates, discounts offered by developers, lower prices and stamp duty cuts in key areas.

The improved sales momentum has lifted confidence among realty developers, pushing them to launch more projects as indicated by the rise in new offerings across markets.

Indian real estate sector has witnessed high growth in the recent times with rise in demand for office as well as residential spaces. Government of India along with the governments of respective States has taken several initiatives to encourage development in the sector. The Smart City Project, with a plan to build 100 smart cities, is a prime opportunity for real estate companies.

The residential sector is expected to grow significantly, with the central government aiming to build 25 million affordable houses in urban areas across the country by 2025, under the ambitious Pradhan Mantri Awas Yojana (PMAY) scheme of the Union Ministry of Housing and Urban Affairs. Expected growth in the number of housing units in urban areas will increase the demand for commercial and retail office space.

Indias real estate sector is witnessing a healthy increase in demand in 2024 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.

Real Estate Sector

In FY 2024, the real estate sector saw remarkable growth, driven by strong housing demand, stable interest rates, and a robust economy. Real estate investments in India reached $5.1 billion, with a substantial portion allocated to land acquisitions, representing 40% of total investments. This trend expanded to tier 2 and tier 3 cities, highlighting real estates attractiveness as an investment avenue, including options like direct purchases, Real-Estate-Investment-Trusts (REITs), and Mortgage-backed-Securities (MBS).

FY 2024 was a milestone year for Indias real estate sector, with record-breaking sales and sustained growth. Despite a notable increase in new launches, inventory levels remained stable or decreased in tier-1 cities, highlighting strong demand. The residential segment excelled, driven by stable interest rates, a robust economy, and evolving consumer preferences. The demand for Commercial office space recovered from slowdown induced by remote work trends and global economic slowdown, while the retail real estate sector experienced a robust revival, surpassing pre-pandemic consumption levels.

Residential Real Estate Market

In CY 2023, Indias residential real estate sector demonstrated resilience with sustained strong demand. Property sales surged significantly higher than the previous year. This robust performance reflects enduring demand fueled by a robust economic rebound, favorable affordability, and positive macroeconomic conditions. However, challenges like soaring raw material costs, consumer inflation, and increased borrowing expenses emerged.

The lockdown periods led to heightened savings and minimal income disruptions among mid to high-income segments, bolstering sustained demand. Additionally, the real estate sector found relief in the RBIs decision to maintain the policy repo rate. The sector experienced notable changes in underlying factors during CY 2023, indicating evolving market dynamics, as per property consultant Knight Frank. The sales performance in CY 2023 demonstrated significant strength. The total value of homes sold in CY 2023 rose by 38% compared to the total sales value for all of CY 2022.

The Knight Frank Affordability Index, which monitored the ratio of Equated Monthly Instalment (EMI) to income for households, showed signs of improvement after a brief decline in affordability levels observed in CY 2022. This improvement was driven by stronger-than-anticipated economic momentum, and inflation levels remaining within the central banks tolerance band. These factors resulted in higher income levels that offset the rise in prices and interest rates.

Although there was only a marginal overall improvement in affordability, Mumbai remained the only city surpassing the affordability threshold of 50%, with Ahmedabad retaining its position as the most affordable housing market at 21% affordability. Other cities like Pune and Kolkata followed closely at 24% in CY 2023. Affordability levels across cities significantly improved compared to pre-pandemic CY 2019 levels, with NCRs affordability index rising from 34% in CY 2019 to 27% in CY 2023, and Bengaluru increasing from 32% in CY 2019 to 26% in CY 2023.

The real estate market experienced an unprecedented surge in CY 2023, surpassing expectations and setting new records. This has created significant opportunities for both domestic and international investors, driving the economy forward. Overall, the residential sector remains a focal point for growth, fueled by sustained demand and stable economic conditions.

According to the Knight Frank affordability matrix, affordability for the top eight cities has improved over the last few years with rising income levels and time correction in the housing sector. An EMI/Income ratio of over 50% is considered unaffordable according to the matrix and most cities have witnessed a dramatic increase in affordability due to decadal low interest rates.

Office Market

The office market across major Indian cities demonstrated resilience in CY 2023, despite global challenges. Bengalurus average rentals grew by 6.6% YoY to INR 930/sq m/month, driven by increased demand in key micro markets like PBD East and ORR. Mumbais office rents rose by 3.6% YoY supported by improved infrastructure and new metro lines. The National Capital Region (NCR) saw unprecedented growth in office leasing, reaching a decadal high of 0.9 mn sq m in transaction volume, with a 14% increase over CY 2022.

In Bengaluru, the acceleration of firms returning to office and growth in India-facing businesses boosted demand, while stable inflow from western markets supported Mumbais rental growth. NCRs office market saw a decline in vacancies to 12.3% due to record leasing in CY 2023, indicating a positive trend for market health. Punes office rents also rose moderately by 2% YoY reflecting increased transactions amid limited supply.

BUDGET 2024 - TAKEAWAYS

The Union Budget FY25 strategically aims to boost Indias economic landscape, emphasising on employment generation, fiscal consolidation, and infrastructure development. The focus on capacity building through higher spending on hard as well as soft infrastructure and consequently facilitating job creation has continued. Capex remains unchanged at a record high of 11.1 lakh crore (share at 3.4% of GDP). The welfare of four major ‘castes, Garib, Mahila, Yuva, and Annadata, has been recognized as paramount to the overall well-being of the country and its long-term economic growth, with initiatives to boost womens workforce participation, major agricultural upgrades, and youth employment. Overall, the budget ensures economic stability and growth amid global uncertainties, while providing a welfare umbrella for the Indian population.

This years union budget was supportive to fostering long term growth in Indias real estate sector, emphasizing urban infrastructure development and the digital economy. The Governments heightened emphasis on infrastructure capital expenditure sets a favorable backdrop for real estate opportunities. Key measures in this regard include:

Inclusive Development

Despite COVID-19 challenges, PMAY (Rural) is close to its three crore houses target, with plans for two crores more houses in five years. The PMAY scheme for affordable housing includes PMAY (Urban) and PMAY (Rural), with a total allocation of 80,671 crore, of which 54,500 crore is for PMAY (Rural). PM-SVANidhi successfully supported 78 lakh street vendors with credit. The government aims for holistic development, envisioning ‘Viksit Bharat by 2047.

Viksit Bharat@2047

With the Indian economy witnessing sustained growth, it is on track to reach USD 5 trillion by FY 2028. By FY 2047, the domestic economy is estimated to be worth USD 30 trillion. In FY 2024, the Prime Minister of India announced its vision of building a Viksit Bharat@2047, with the objective of creating a prosperous Bharat possessing state-of-the-art infrastructure and facilities.

Impact of Viksit Bharat on different sectors of the economy Infrastructure

To realise the vision of a Viksit Bharat, the Indian government is prioritising the creation of best-in-class infrastructure. Major efforts include the development of the Middle East-Europe Economic Corridor, which will further drive the Indian governments Viksit Bharat initiative.

Housing

The Pradhan Mantri Awas Yojana (PMAY), focused on housing development and urbanisation, will also contribute to the Viksit Bharat 2047 initiative. Further, PMAY will offer citizens affordable housing solutions, develop metropolitan and urban areas and empower underserved communities.

Transportation

The development of transport infrastructure will rationalise the high logistics costs through improved nationwide connectivity and mobility, thus enabling India to realise its vision of becoming Viksit Bharat by 2047.

Housing

The PM Awas Yojana announced plans for 2 crore houses in the future, but details about the urban wing were lacking. Additionally, a target of 1 crore houses for rooftop solarization was set, offering urban households 300 units of free electricity monthly. The Budget highlighted a new scheme for middle-class urban residents in rented housing, slums, chawls, or unauthorized colonies, allowing them to buy or build their own homes.

Urban Reforms

The ongoing municipal reforms featured an incentivization package and a fifty-year loan to states, with a focus on capital project utilization and urban planning reforms to boost municipal bond creditworthiness.

BUDGET 2024 - KEY TAKEAWAYS FOR CLIMATE CHANGE

The Union Budget for FY 2024-25 reflects Indias resolute stride towards sustainability, harnessing renewable energy, and fostering sustainable development amidst the pressing global climate challenges. Emphasizing “Amrit Kaal,” the budget outlines an ambitious pathway to achieve a “Prosperous Bharat in harmony with nature, modern infrastructure, and opportunities for all,” aiming for net-zero emissions by 2070. The capital expenditure outlay has been raised by 11.1%, with Indias Real GDP expected to expand at a rate of 7.3%. The governments commitment to stimulating growth through infrastructure development is underscored by its decision to expand the PM Awas Yojana (Grameen), aiming to construct an additional two crore homes over the next five years in response to the growing number of households. The fund allocation has risen to 80,671 crore, up from the previous years budget estimate of 79,590 crore. Furthermore, the initiative to provide one crore households with up to 300 units of free electricity each month through rooftop solarization aligns with this strategic focus on bolstering infrastructure and sustainable development.

The government is set to enhance the electric vehicle infrastructure, supporting the production and expansion of charging stations. It aims to boost the use of electric buses across public transportation systems with the help of a payment security mechanism. Budget allocations reflect this focus: funding for Solar Power (Grid) has risen from 4,970 crore in 2023-24 to 8,500 crore in 2024-25. In a similar vein, investment in the National Green Hydrogen Mission has increased from 297 crore to 600 crore. These increases highlight the governments commitment to advancing renewable energy and fostering eco-friendly practices. Additionally, a systematic integration of compressed biogas with natural gas for vehicles and homes will be initiated.

During the 26^th session of the Conference of the Parties (COP-26) to the United Nations Framework Convention on Climate Change (UNFCCC) in 2021, India set forth ambitious climate objectives. The country has updated its goals for 2030, aiming to achieve 500 GW of non-fossil fuel energy capacity, meet 50% of its energy needs with renewable resources, cut the carbon intensity of its economy by 45% from 2005 levels, and reach carbon neutrality by 2070. The following COP-27, convened in Sharm El-Sheikh, Egypt, marked a shift from setting goals to implementing them, with a spotlight on the adaptation agenda and the integration of technology. Support was garnered for financing the achievement of these climate goals and advancing the development of models for a low carbon transition. The promotion of carbon credits and the establishment of carbon markets to assist in the transition towards low carbon emissions were also emphasized. At COP28, India articulated a stance on climate action, underscoring its achievements, commitments, and the principle of climate justice as central to global efforts. The country highlighted its progress towards its Nationally Determined Contributions (NDCs), including a significant reduction in emission intensity and a substantial increase in non-fossil fuel- based electric capacity ahead of its 2030 targets. To reach net-zero emissions by 2070, blending compressed biogas with CNG and PNG will be gradually enforced. Moreover, by 2030, there are plans to install coal gasification and liquefaction facilities with a capacity of 100 metric tons. In pursuit of Indias ‘net-zero goal by 2070, key initiatives include: allocating viability gap funding for 1 GW of offshore wind energy, establishing a 100 MT coal gasification and liquefaction capacity by 2030 to decrease imports, mandating phased blending of CBG with CNG and PNG, and offering financial support for biomass aggregation machinery.

The 2024-25 Union Budget presents a blueprint that combines technology, environmental sustainability, and economic advancement. It is geared towards creating jobs by investing in renewable energy, eco-friendly fuels, and sustainable farming. The budgets financial provisions are aimed at supporting a green revival and fulfilling climate commitments in a thorough and inclusive manner.

IMPACT OF CLIMATE CHANGE ON REAL ESTATE SECTOR

In 2022, emissions from buildings, covering both operational (26%) and embodied emissions (7%), made up about a third of total energy system emissions. The emissions intensity of cement production has increased by close to 10% since 2015, which is challenging to decarbonize. The rest stems from direct on-site emissions, predominantly from electricity use for lighting and air conditioning. Theres a significant yet unexplored opportunity to reduce emissions, hindered by the ongoing reliance on fossil fuel-driven assets, the absence of potent energy-efficiency mandates, and a deficit in investments towards sustainable buildings.

Due to the nature of business, the real estate sector is a significant contributor to the GDP of India. It is also responsible for nearly one-fifth of the nations emissions, and 33% of total energy consumption. Considering Indias rigorous climate objectives, including the goal of Net-Zero by 2070, the Indian real estate sector is required to act quickly and effectively. As climate change increasingly affects economies and this sector, there are both physical and transitional risks that could harm assets and the markets they are part of, either directly or indirectly.

Real estate portfolios are exposed to various risks, including the impact of climate change, which can cause damage to properties through extreme weather events. These impacts can be chronic, reflecting long-term trends, or acute, indicating severe short-term occurrences, and vary by location or in response to efforts to shift towards a low-carbon economy. The urgency for drastic measures is underscored by the observable effects of climate change, such as escalating temperatures, rising sea levels, and increased frequency of extreme weather events. Additionally, environmental hazards adversely affect the ability to provide safe, healthy, and adequate working conditions, alongside job availability. Climate change exacerbates risks to occupational health and safety, with high temperatures already contributing to a 1.4% loss in working hours in 1995. Studies suggest that without addressing climate change, and with an expected temperature increase of 1.3?C by 2030, we could see a productivity loss of 2.2%, equating to 80 million full-time jobs. Recognizing their contribution to climate change, real estate firms must urgently implement innovative strategies to adapt their buildings, operations, workforce, products, and services to these significant and impending changes.

In recent years, theres been a noticeable uptick in worldwide investments aimed at diminishing the energy consumption of buildings. This move by the real estate sector towards minimizing its environmental footprint marks a positive trend. Governments, policymakers, investors, and the general populace are shifting their views on climate change and are taking bold actions to counteract its effects. The creation of tools that encourage eco-friendly building practices and the widespread acceptance of green building certifications are helping more areas to align their construction activities with the goals of the Paris Agreement. While the surge in investment is indeed encouraging, it also highlights the necessity of engaging with additional external partners to leverage technology effectively, ensuring seamless operations, accountability, and transparency.

OPPORTUNITIES, THREATS 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.

Real estate sector in India is expected to reach US$ 1 trillion by 2030. By 2025, it will contribute 13 per cent to countrys GDP Emergence of nuclear families, rapid urbanization and rising household income are likely to remain the key drivers for growth in all spheres of real estate, including residential, commercial and retail. Rapid urbanization in the country is pushing the growth of real estate. Indian real estate developers have shifted gears and accepted fresh challenges.

Housing Demand

A combination of economic growth, increasing income levels, and the perception that housing prices are stabilizing has led to a notable uptick in the demand for homes. This trend is evident as potential buyers, previously on the sidelines, are now entering the market as first-time homeowners or existing homeowners looking for larger spaces. The shift towards remote and hybrid work models is further influencing the desire for more spacious living arrangements. Employers offering flexible work options continue to be a significant factor in this trend, as it allows employees the freedom to live further from the office, thereby boosting demand for residential properties in various segments.

Sector Consolidation

The Indian real estate sector, characterized by its highly fragmented nature, has been undergoing a significant consolidation phase for several years. This consolidation has been accelerated by various factors, including the pandemic, which has effectively sidelined less robust participants. The current environment in the real estate industry poses challenges to the entry of new competitors. With the trend earning towards a smaller number of dominant developers in each region, this period of consolidation offers an attractive chance for current real estate firms to meet the increasing demand for housing.

Affordable housing

The segment of affordable housing remains a pivotal area for developers and a primary focus for the government. As per the new Union budget, a housing for Middle Class scheme is to be launched to encourage the middle class to buy their own houses. The Pradhan Mantri Awas Yojana (PMAY) is close to achieving 3 crore houses, additional 2 crore houses are targeted for the next 5 years, as discussed above. This shows that the affordable housing market is projected to experience a surge in demand, bolstered by an anticipated economic revival and increasing income levels.

The affordable housing segment could see a meaningful uptick in demand with an expected economic recovery, improving wages and affordability. Lastly, Affordable Rental Housing Complexes (ARHCs) have been accorded as a sub-scheme under Pradhan Mantri AWAS Yojana-Urban (PMAY-U) to provide ease of living to urban migrants engaged in the informal sectors of the economy.

Digital Real Estate Sales

Digital marketing has become a key strategy for real estate developers to boost sales and connect with customers. Since the pandemic, their marketing efforts have expanded beyond attracting new customers and building brand awareness to include creating personal connections digitally. Thanks to technology that allows property purchases online, developers have seen strong sales, even during lockdown periods. Theyre using digital tools to engage with potential buyers, present project details, offer virtual tours, and target Non-Resident Indians (NRIs) to increase sales. Advanced technologies like virtual reality, augmented reality, and AI-driven chatbots are increasingly employed to offer tailored services to potential clients. Moving forward, developers will need to keep up with technological advancements, as the share of real estate transactions conducted online is expected to grow.

THREATS & CHALLENGES:

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 lead by increase in commodity prices;

• Growth in auxiliary infrastructure facilities; and

• Over regulated environment.

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. India is touted to be the most populous country by the year 2050. More than 50 per cent of people are urban center and Tier 1 cities. To accommodate the population, India would require more new cities and urban center on a mass scale in order to provide the required resources to the inhabitants.

The geo-political war in Ukraine, a slowing global economy, tightening fiscal policy mired with badly managed/failure of few major players in banking and finance sectors around the world suggest a possible moderation in business confidence and investment. Uncertainty over the global trade environment and volatility in the financial markets have softened the global trade and protracted war in Ukraine poses further downside risks to this forecast. The short-term economic outlook for many European countries has deteriorated sharply giving headwinds for mild recession.

Regulatory Hurdles

The real estate industry is subject to extensive regulation, and any negative adjustments in governmental policies or the regulatory framework can negatively influence the sectors performance. Significant delays in procedures related to acquiring land, determining land use, initiating projects, and obtaining construction approvals are common. Changes in policy applied retrospectively, along with regulatory obstacles, could affect profitability and diminish the appeal of both the sector and the companies active within it.

Monetary Tightening and Funding Issues

The lending to real estate developers by the NBFCs and HFCs was already limited after the IL&FS crisis and the pandemic has further deteriorated the liquidity situation for weaker developers who had to resort to alternative funding in absence of long term loans from banks.

In recent years, the landscape of real estate financing has shown a marked divergence. Well-established developers with lower debt levels have continued to secure funding with relative ease, benefiting from the selective approach of lenders, while those with weaker financial standings have encountered challenges in accessing capital. The performance of the real estate sector is intricately connected to the broader economic recovery and the prevailing monetary policies. The RBI has maintained an accommodative stance to bolster economic growth. However, it is anticipated that there will be a shift towards tighter monetary policies as efforts intensify to manage persistent inflation. The budding economic revival, coupled with potential increases in interest rates, may pose challenges for the real estate sector shortly. Higher housing loan costs and an escalation in financing costs for developers, who are already contending with margin pressures due to the rising prices of commodities, could have implications.

Shortage of Manpower & Technology

As the countrys second-largest employment provider, the real estate sector relies significantly on manual labor. The pandemic severely impacted this sector due to labor shortages, disrupting project completion schedules. Consequently, theres a pressing need for the adoption of alternative construction methods that are less dependent on manual labor and more on technology.

COMPANY STRENGTHS:

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 globally 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.

HUMAN RESOURCES:

The timely availability of skilled and technical personnel is one of the key challenges. The Company maintains healthy and motivating work environment through various measures. This has helped the Company to recruit and retain skilled work force which would result in timely completion of the projects. The Company has cordial relation with the employees and contractors of the company. The staff has the depth of experience and skills to handle companys activities. Skilled team of workers and other professionals ensure superior quality standards during every stage of work. The total employee strength as on March 31,2024 was 76.

Performance Management System:

Your Company has adopted a holistic approach to the performance management process that focuses on three broad categories - Nurture & Engage, Connect & Coach, Capability Building & Development.

The process begins with the Annual Goal Setting exercise that provides clarity to all employees about their targets. Goal setting ensures a commitment from all employees to achieve higher business milestones and alignment to the organizations goals at a macro level. The process is followed by a formal Mid Year Review and the Annual Review and Rating exercise.

The essence of the performance management process is Continuous Performance Management (CPM). CPM is an agile, modern, human centered approach of evaluating and improving employee performance. It fosters a forward looking mindset and has an emphasis on real time, frequent check-ins and documentation. It is an approach that breaks the stereotype of formal later date discussions, rather it lays emphasis on spot feedback. The continuous check-ins help create an environment of trust, strengthen relationships, build communication and provide remedial coaching to the employees thereby assisting them to realize their full potential.

The Succession Planning helps in identifying the Critical Roles and High Potential employees who can take up these roles in the future. The process ensures business continuity, creates a pipeline for future leaders and provides employees with a defined growth path and an opportunity for a structured and focused learning.

Your Company has a robust Career Development framework that gives employees the power to define aspirations and take charge of their career. They can discuss their development needs and aspirations with their managers and carve a development plan for the future. Your Company extends the required assistance to employees and provide them with opportunities that can facilitate employees to grow both personally and professionally. This enables employees to achieve their career goals and in turn creates a set of motivated, valuable and skilled workforce.

Learning & Development:

The Learning & Development function aims to foster a culture of continuous collaboration and learning. The blended approach to Learning helps in development of Technical, Behavioral, Leadership as well as General Management skills.

Mental Wellness:

Mental wellness is a positive state of mental health. It ensures that individuals think, feel and act in ways that will create positive impact on their personal and professional life. Keeping this in mind, your Company launched 24/7 Employee Assistance Program (EAP).

This program offers professional counseling services to all employees seeking help in managing concerns related to their life. It supports employees who experiences problems that affect their well-being and performance at work. These sessions are conducted privately and ensures complete confidentiality.

For the benefit of all employees, your Company organized the mental wellbeing session facilitated by professional counsellors covering certain real-life issues and topics like managing disagreements, dealing with lockdown situations, parenting, time management, work life balance, stress management and others.

This program has greatly assisted employees during the current unprecedented and challenging times. It has enabled them to manage stress, handle challenges and build stronger relations. This has led to a happier, healthier, focused and more productive workforce.

Health and Safety:

Your Company is always committed to the health and safety of its employees. Your Company provides a clean, hygienic and conducive work environment to all employees. All offices and sites go through regular sanitation, social distancing norms are followed, sanitizers are placed at various locations, visitors entries are minimized, wearing masks is mandatory. Weekly mailers are sent to educate employees regarding safety measures to be practiced during all the times.

Benchmarking:

It is your Companys constant endeavor to improve its processes and policies. Your Company strives to improve its policies and processes on a continuous basis and benchmarking as a tool assists in achieving the same. It helps to identify actionable insights and stay up to date with Human Capital trends.

Fun at work:

The Fun at Work Committee focuses on innovative initiatives to engage the workforce as enjoying work and ensuring camaraderie is a key element of employee happiness. Celebrations around festivals and cultural activities break the monotony at work and help people to have a more positive mind set, higher levels of wellbeing and better mental health.

OUTLOOK:

The Indian economy is projected to grow by more than 6% in FY24 as per various institutional estimates, making it one of the fastest-growing economies. In CY 2024, we anticipate further downward trends in the global economy. This however, should be an opportunity for the Indian economy to become a world leader. The real estate sector is likely 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.

An increase in earning potential, a need for a better standard of living and the growing base of aspirational consumers and their lifestyle changes have led to substantial growth in the sector. With suited economic growth, the premium housing segment will also witness higher demand in the years to come.

Mumbai, Delhi-NCR, Hyderabad and Bangalore are expected to remain on investors radar in 2023.

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 fulfill 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.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an adequate internal control system, corresponding with the size and nature of its business. The system of internal control is supported by documented policies, guidelines and procedures to monitor business and operational performance which are aimed at ensuring business integrity and promoting operational efficiency. It ensures timely and accurate financial reporting in accordance with applicable accounting standards, safeguarding of assets against unauthorized use or disposition and compliance with all applicable regulatory laws and Company policies.

The Company has an Internal Auditor who oversees the entire internal audit function. Internal Auditors of the Company review the internal financial control systems on a regular basis for its effectiveness and necessary changes and suggestions are duly incorporated into the system. However, given the size of its operations in terms of nature of its business, it also uses services of independent audit firms to conduct periodic internal audits in line with an audit plan that is drawn at the beginning of the year. This audit plan, prepared by the Internal Auditor, is approved by the Audit Committee and the Board of Directors.

Internal audit reports are placed periodically before the Audit Committee of the Board of Directors, which reviews the adequacy and effectiveness of the internal control systems and suggests improvements for strengthening them.

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.

SEGMENT WISE PERFOMANCE:

The Company is primarily engaged only in the business of sale of Plots under Real Estate Segment in India. As per the Indian Accounting Standard 108 on Segment Reporting, the Board would like to inform that under the real estate segment total Revenue was 2532.39 Lakhs only. The Total Profit Before Tax for the Company was 194.72 Lakhs only & Total Profit After Tax for the Company was 161.35 Lakhs only.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE OF THE COMPANY:

The Company achieved a turnover of 2532.39 Lakhs only and The Total Profit Before Tax for the Company was 194.72 Lakhs only & Total Profit After Tax for the Company was 161.35 Lakhs only.

Financial performance overview

Analysis of financial statements for FY 2023-24 is provided below:

Key Financial Ratio Analysis:

In accordance with SEBI (Listing Obligations and Disclosure requirements 2018) (Amendment) Regulations 2018, the Company is required to give details of significant changes (Change of 25% or more as compared to the immediately previous financial year) in key sector specific financial ratios.

A comparative table showing synopsis of FY 2023-24 versus FY 2022-23 of Key Financial Ratio is provided below:

Ratios	Numerator	Denominator	Current year	Previous year	Variance (in %)	Explanations / Remarks
Current ratio (in times)	Total current assets	Total current liabilities	4.55	3.69	23.47	Increase in Current Ratio is due to better working capital management
Debt-Equity ratio (in times)	Debt consists of borrowings and lease liabilities*	Total Equity	0.01	0.07	-91.86	Cash and Cash equivalents are more than debt.
Debt service coverage ratio (in times)	Earning for Debt Service = Net Profit before taxes + Non-cash operating expenses+ Interest + Other non-cash adjustments	Debt service = Interest and lease payments + Principal repayments*	11.42	8.41	35.84	Debt Service Coverage Ratio increase, the company has good earnings in servicing the Debt on time
Return on equity ratio (in %)	Profit for the year less Preference dividend (if any)	Average total equity	14.92	3.91	281.75	Return on equity increased due to increase in Total Profit
Inventory Turnover Ratio (in times)	Cost of goods sold OR sales	Average Inventory	0.48	0.38	24.75	Inventory Turnover changes due to increase of Sales
Trade receivables turnover ratio (in times)	Revenue from operations	Average trade receivables	N.A	N.A		(No Trade receivables). As the company Selling its products only after receiving the advance from Customers.
Trade payables turnover ratio (in times)	Purchase of Services and other expenses	Average trade payables	N.A	N.A		Since average trade payables are very neglizable hence not considered
Net capital turnover ratio (in times)	Revenue from operations	Total Equity	3.26	0.91	258.32	Increase in ratio due to increase of sales
Net profit ratio (in %)	Profit for the year	Revenue from operations	4.57	3.82	19.85	Net profit ratio increased due to increase in Sales, Other Income and difference in tax provisions
Return on capital employed (in %)	Profit before tax and finance costs	Capital employed = Tangible Net worth + Lease liabilities + Deferred tax liabilities	14.84	4.58	224.13	Increase in ratio due to increase of Profit
Return on investment (in %) - Unquoted	Income generated from invested funds	Average invested funds in treasury investments	N.A.	N.A		Ratio not applicable as there is no income generated from invested funds
Operating Profit ratio	Earnings before Interest, Tax and Amortization	Net Operating Sales	5.20	5.28	-1.48	Decrease in ratio due to Increase of Operating expenses
Return on Net worth	Net Income	Shareholders equity	16.97	14.34	18.27	Increase in ratio due to Increase of Sales

CAUTIONARY STATEMENT:

This Management Discussion and Analysis contain forward looking statements within the meaning of applicable security laws and regulations that reflects your Companys current views with respect to future events and financial performance. The actual results may differ materially from those anticipated in the forward-looking statements as a result of many factors. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties, regarding fluctuations in earnings, our ability to manage growth, competition, economic growth in India, ability to attract and retain highly skilled professionals, time and cost over runs on contracts, government policies and actions with respect to investments, fiscal deficits, regulation etc. In accordance with the Code of Corporate Governance approved by the Securities and Exchange Board of India, 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. The Company does not undertake to make any announcement in case any of these forward looking statements become materially incorrect in future or update any forward looking statements made from time to time on behalf of the Company.

For and on behalf of the Board of Directors of COUNTRY CONDOS LIMITED

PLACE: HYDERABAD	Y. VARUN REDDY	D. KRISHNA KUMAR RAJU
DATE : 05-08-2024	VICE-CHAIRMAN & DIRECTOR	VICE-CHAIRMAN & CEO
	DIN:01905757	DIN: 00115553