DLF Ltd Management Discussions.

Real economy grew by 7.1% in FY 2016-17, compared with 8% in the previous year. This growth suggested that the economy was relatively resilient to the demonetization event, which reduced cash in circulation by 22.6% in second half of FY 2016-17 [Source: Economic Survey, August 2017]. Annual inflation declined to 4.5% in FY’17. The inflation decline has been dramatic, dropping sharply from 6.1% in July 2016 to 1.5% in June 2017. The sharp dip in WPI inflation in late FY’15 and through FY’16 owed to deceleration in global commodity prices, especially crude oil prices and prudent policies followed by the Reserve Bank of India and Government of India. With global commodity prices recovering and base effect giving an upward push, wholesale inflation perked up during FY’17. With the green shoots slowly becoming visible in merchandise trade, robust capital flows, the external position appears robust, reflected inter-alia in rising reserves and strengthening exchange rate. The current account deficit narrowed in 2016-17 to 0.7% of GDP, down from 1.1% of GDP in the previous year, led by sharp contraction in trade deficit which more than outweighed the declines in net invisibles. Export growth turned positive after a gap of two years and imports contracted marginally, so that India’s trade deficit narrowed to 5% of GDP in FY’17 as compared to 6.2% in previous year.

However, there is an anxiety because of series of deflationary impulses weighing on the economy, which is yet to gather its full momentum and still away from its potential. Stressed farm revenues, declining non-cereal food prices, high levels of NPA’s in bank balance sheets, farm loan waivers and fiscal tightening it would entail, declining profitability in the power and telecom Sectors have been exacerbating the balance sheet problem. In the current fiscal 2017-18, the outlook for growth is a forecast range for real GDP growth of 6.75% to 7.5%. India is undergoing structural shift in the inflationary process towards low inflation. The energy market is very different today than a few years ago in a way as renewables play an increasing influence resulting in a downward bias to oil prices. Sustaining current growth trajectory will require action on more normal drivers of growth such as investment and growth and cleaning up of balance sheets to facilitate credit growth. Inflation in the near term will be determined by a number of proximate factors, including the outlook for capital flows and exchange rate, which will be influenced by the outlook and policy in advanced economies, especially the US, the recent nominal exchange rate appreciation, the monsoon, implementation of Goods and Services Tax (‘GST’), 7th Pay Commission awards, NPA resolution of the banks, likely farm loan waivers and the output gap. Global economy activity is expected to pick up with a long-awaited cyclical recovery in investment, manufacturing and trade, according to the World Economic Outlook of International Monetary Fund (IMF). India has emerged as one of the fastest growing economies in the world.

The expected growth in the Indian economy is amongst the highest in the world and can be attributed to the combined impact of Government reforms, infrastructure spend by the government and the Central bank’s inflation focus supported by benign global commodity prices. Reserve Bank of India’s policy during the past year was inclined towards stability in the economy and rebalancing liquidity conditions. The strategy going forward is to put the resolution of bank’s stressed assets on a firm footing and credit to revive and flow to productive sectors of the economy.

With inflation continuing below the targeted 4% range of RBI, we could expect that policy rates may see downward trajectory.

The present Government has announced numerous initiatives to provide thrust to the economy such as the GST, demonetization and various tax reforms. The current regime continues to liberalize the Foreign Direct Investment (FDI) Policy to enable greater inflows and foster growth in numerous sectors.

The Indian Real Estate Sector is currently witnessing a structural transformation towards being a complete organized sector. The transformation is due to multiple initiatives by the Government such as the Real Estate (Regulation and Development) Act, 2016 [‘RERA’], increased incentives for affordable housing like Pradhan Mantri Awas Yojana (PMAY), Credit-Linked Subsidy Scheme (CLSS), Real Estate Investment Trust Regulations, 2014 (REIT Regulations).

The Sector has been witnessing enhanced interest from Institutional capital owing to greater transparency, reforms such as RERA and REIT Regulations. The commercial sector continues to demonstrate immense potential while the residential sector is undergoing a short-term unpredictable disruption attributed to various reforms. However, it is expected that these reforms are projected to augur well for industry in the long run.

Interest rates are softening and the banks have started to pass this benefit to the customers. The sector will witness enhanced demand flowing in after the complete benefit is transferred to the customers.

Since 2014, new launches across major cities of India declined. Developers continued to focus on offloading

Your Directors present the Company’s Report on Corporate Governance in compliance with Regulations 17 to 27 read with Schedule V and Clauses (b) to (i) of Regulation 46(2) and paragraphs C, D and E of Schedule V of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations").

The Board and Management of DLF believe that operating to the highest level of transparency and integrity in everything we do, is integral to the culture of our Company. The Company’s visionary founder Choudhary Raghvendra Singh established the culture of ensuring that all our activities are for the mutual benefit of the Company and all our stakeholders comprising customers, regulators, employees, shareholders and the communities at large to whom the Company is privileged to serve. The Board and management of DLF are committed to the highest standards of accountability, transparency, social responsiveness, operational efficiency and good ethics following the strong legacy.

The Company is committed to sound Corporate Governance practices and compliance with all applicable laws and regulations. The Board believes that combining the highest level of ethical principles with our unmatched brand, experience and expertise, will ensure that we continue to be the leading company in Building India. The Board also believe that sound corporate governance is critical to retain stakeholders’ trust. Accordingly, the Company views corporate governance in its widest sense almost like a trusteeship, a philosophy to be progressed, a value to be imbibed and an ideology to be ingrained into the corporate culture.

DLF has implemented corporate governance practices that go beyond just meeting the letter of law and has not only adopted practices mandated in the Listing Regulations, but also incorporated the relevant non-mandatory recommendations.

The Company has put in place an internal governance structure with defined role and responsibilities of every constituent of the system. The Company’s shareholders appoint the Board of Directors, which in turn governs the Company. The Board has constituted various Committees to discharge its responsibilities in an effective manner. The Company Secretary acts as the Secretary to all the Committees. The Chairman provides overall directions and guidance to the Board. The Vice Chairman provides strategic directions to the management. The Chief Executive Officer(s) and a group of senior executives of the Company, are individually empowered for day to day