GIC Housing Finance Ltd Management Discussions

OVERVIEW OF THE INDIAN ECONOMY

Indian economy continues to demonstrate resilience in this turbulent global environment, as the growth momentum is supported by robust sectoral performance and improving consumption trends. India has become the new engine of global growth and is playing a larger role on the world stage. Indian economy is growing at a robust pace with an average annual growth of 8 per cent during the last three years. The credit quality of Indian corporates has strengthened on the back of deleveraged balance sheets, sustained domestic demand and public capital expenditure. The healthy balance sheets of banks and corporates, governments continued thrust on capex, high-capacity utilization and business optimism augur well for investment activity. The Reserve Bank of India (RBI) raised its growth projection to 7.2 per cent for FY 2024-25 from 7 per cent estimated earlier. When the world economy picks up and the global environment becomes more conducive, it would add to Indias growth. Further, the Union Budget FY 202425 focuses on nine priority areas with potential for transformative changes and is expected to spur economic growth.

Indian economy is displaying steady growth and has been a significant contributor to global growth. Economic resilience and improved prospects are anchored by macroeconomic stability. Growth of domestic demand remained robust, with a surge in investment, including in infrastructure, offsetting a moderation of consumption growth as post pandemic pent-up demand eased. The domestic financial system remains stable and supportive of real activity due to the strengthening of the banking sector. However, global spillovers remain a key near-term vulnerability. Notwithstanding the innate strength built on strong macroeconomic fundamentals and prudent policy, the reverberations of a tumultuous external environment are also reflected in various segments of the economy. Sustained foreign portfolio outflows exerted significant pressures on domestic equity markets in February and engendered currency depreciation.

India is poised to lead the global economy once again, with the International Monetary Fund (IMF) projecting it to remain the fastest growing major economy over the next two years. Indias economic outlook for 2025 and 2026 remains one of the brightest among major global economies, as highlighted by the IMF. Despite global uncertainties and downward revisions in growth forecasts for other large economies, India is set to maintain its leadership in global economic growth. Supported by strong fundamentals and strategic government initiatives, the country is well-positioned to navigate the challenges ahead. With reforms in infrastructure, innovation, and financial inclusion, India continues to enhance its role as a key driver of global economic activity.

INDIAN ECONOMY FUTURE OUTLOOK

India stands at a pivotal moment in its economic journey. With a large and youthful population, an expanding digital ecosystem, and ongoing economic reforms, the country is on track to become one of the top three global economies by the early 2030s. However, realizing this potential requires navigating multiple challenges such as rising income inequality, environmental stress, infrastructure deficits, and uncertainties in the global economic landscape.

As of 2025, Indias GDP is projected to grow between 6.8% and 7.2%, primarily driven by strong domestic consumption, a buoyant services sector, and steady industrial growth. Inflation is stabilizing within the Reserve Bank of Indias target range of 4-6%, though fluctuations in food prices remain a concern. While urban employment is showing signs of recovery, underemployment in rural areas persists. On the external front, a manageable current account deficit of about 2% of GDP, coupled with robust remittances and rising services exports, has helped maintain economic stability despite a high oil import bill.

Key growth drivers shaping Indias future include its favorable demographics, rising consumer demand, and the digital revolution. Over 65% of the population is under the age of 35, fueling a young and aspirational middle class that is transforming sectors like retail, consumer goods, and digital finance. The rapid expansion of digital public infrastructure-such as UPI, Aadhaar, and the Open Network for Digital Commerce (ONDC)-is enhancing productivity and financial inclusion. At the same time, government-led Production Linked Incentive (PLI) schemes are encouraging global manufacturers to invest in electronics, semiconductors, and clean energy, while large-scale infrastructure investments are improving connectivity and urban development.

India is also making significant strides toward building a green economy. With a target to achieve net-zero emissions by 2070, the country is rapidly scaling up its renewable energy capacity, aiming to reach 500 GW by 2030. Investments in electric vehicles, green hydrogen, and sustainable farming are contributing to both economic and environmental resilience.

Despite these strengths, several challenges could impede progress. Job creation remains a pressing issue, particularly in labourintensive industries. There is also a mismatch between workforce skills and industry requirements, highlighting the need for widespread vocational training and education reform. Fiscal consolidation is another priority, as the government must balance capital spending with efforts to control public debt and reform subsidies. Environmental concerns, including water scarcity, air pollution, and climate change-induced weather disruptions, pose serious risks to agriculture and urban sustainability. Moreover, global uncertainties such as geopolitical tensions, volatile commodity prices, and shifting trade dynamics could impact Indias external sector performance. Looking ahead to 2030, Indias nominal GDP is projected to reach between $5.5 and $6.5 trillion, making it the worlds third-largest economy. Per capita income could rise to $4,500-$5,500, while the urban population is expected to increase from the current 35% to around 40-45%.

In conclusion, Indias economic outlook is optimistic but contingent on inclusive and sustainable growth. Strategic priorities should include deepening structural reforms in land, labor, and capital markets, improving the quality of education and healthcare, accelerating green investments, and enhancing institutional governance. With disciplined execution and a focus on long-term resilience, India has the potential to emerge as a global economic powerhouse in the decade ahead.

HOUSING FINANCE INDUSTRY OVERVIEW (Source NHB Annual Report)

The Indian housing finance sector is a vibrant and dynamic industry that plays a pivotal role in enabling homeownership for millions of Indians. It provides financial assistance to individuals and developers for purchasing, constructing, renovating, or improving residential properties. The sector is integral to Indias economic and social development, fostering job creation, infrastructure growth, and financial inclusion. It encompasses a diverse range of stakeholders, including banks, housing finance companies (HFCs), non-banking financial companies (NBFCs), and regulatory bodies like the Reserve Bank of India (RBI) and the National Housing Bank (NHB).

Housing Finance sector has witnessed substantial growth over the past few years, driven by factors like rising income levels, rapid urbanization, government initiatives, and evolving consumer preferences. Despite challenges such as affordability issues and rural penetration gaps, the housing finance market continues to expand, reflecting the aspirations of a growing population.

Since 2015, the housing sector displayed paradigm shift due to the demand and supply side interventions by the government, providing impetus to the growth of the sector. Indias housing sector is exhibiting healthy momentum attributable to various factors viz. unrelenting quest for homeownership post pandemic, positive homebuyer sentiments, resilient supply from the developers, unchanged repo rate amid Indias growth projections and controlled inflation. Stability in interest rates has further fuelled growth in the Indian housing finance sector by making housing loans more affordable for borrowers. Primary lending institutions (Banks and Housing Finance Companies) are well placed to seize the opportunity from the countrys strong economic prospects through lending to the housing sector. Scheduled Commercial Banks and Housing Finance Companies are major player in the housing finance sector.

Housing Finance Companies act as an important alternative channel of finance to the housing sector and are instrumental in providing affordable finance to marginalized segment and borrowers belonging to informal sector. The slab-wise outstanding individual housing loan of Housing Finance Companies shows that nearly 48 per cent of the share of individual housing loan falls under the category of up to Rs25 lakh outstanding housing loan segment. Real estate prices are increasing as the population grows and the country becomes urbanized. As more people migrate to cities for better opportunities, the demand for homes is pushing up the prices.

Further, the announcements in the Union Budget on encouraging states to reduce stamp duty rates, particularly for women and increase in standard deduction under the New Tax Regime and rationalization of the tax structure could leave Indias salaried tax with more disposable income, consequently, enhance housing demand. As India pirouettes towards its centenary of independence in 2047, aspiring to become Viksit Bharat (developed), in achieving the journey of "Housing for All", the National Housing Bank shall ensure for adequate liquidity availability in the housing finance sector through its various schemes and products.

The Pradhan Mantri Awas Yojana - Urban (PMAY-U), launched in 2015, aims to provide permanent housing in urban areas. As of November 25, 2024, a total of 1.18 crore houses have been sanctioned, with 1.14 crore grounded and over 89 lakh completed. PMAY-U 2.0 was launched in September 2024 to assist an additional one crore households. Currently, 29 states and union territories have signed agreements to implement PMAY-U 2.0, with approval having been granted for 6 lakh houses in FY25. Housing demand in India is expected to touch 93 million units by 2036.

The Ministry of Housing and Urban Affairs (MoHUA) has introduced a unique assessment framework for cities to evaluate climaterelevant parameters, helping them adopt and share best practices. This framework aligns with international standards for green, sustainable, and disaster-resilient urban habitats, enabling Indian cities to promote sustainable urban development.

In FY24-25, the Indian housing finance sector has experienced robust growth, with a projected market size exceeding 81 lakh crore within five years, driven by strong structural fundamentals and government incentives. Banks continue to dominate the market, while Housing Finance Companies (HFCs) are also expanding, particularly in the retail segment. A shift towards higher- ticket loans is evident, aligning with the premiumisation trend in Indias residential real estate market.

KEY CHALLENGES FACED BY HFCs

Housing finance brings together complex & multi-sector issues that are driven by constantly changing local features, such as a countrys legal environment or culture, economic makeup, regulatory environment, our political system. Housing finance companies (HFCs) face several challenges, including affordability issues, regulatory bottlenecks, high competition, and rural penetration difficulties. They also struggle with securing long-term capital, managing asset-liability mismatches, and navigating the complexities of legal systems. Furthermore, rising interest rates, competition from banks, and the need to adapt to technological advancements pose additional hurdles.

Another major issue is affordability, a critical factor for sustainable and inclusive growth. Despite programs like the Pradhan Mantri Awas Yojana (PMAY) aimed at providing housing for low and middle-income groups, challenges persist. These include complex land acquisition processes and the need for stronger infrastructure in affordable housing projects. Addressing these hurdles is crucial to narrow the affordability gap and promote broader economic inclusion.

The housing finance sector of the country is suffering from inadequate financial resources and due to the low paying capacity of most of the Indian population. In the present circumstances, the Government of India is trying to play the role of facilitator by offering a number of housing schemes for different section of the society, but due to poor administrative control and lack of strong will power most of the schemes are squeezed only up to the basic levels and never attain its final objectives.

The Housing finance companies (HFCs) are facing intense competition from banks and larger housing finance companies in Tier I and Tier II cities. Therefore, it is crucial for them to expand their presence in Tier II cities and beyond in order to take advantage of their pricing power.

As HFCs face a shortage of funds, any faults by the customers will result in the blockage of the same. This will have a direct impact on the lending capacity of the companies. HFCs are not in a position to absorb such a shock. The availability of funds is the primary challenge faced by all HFCs. Since the borrowing capacity of people have increased due to budget proposals, but the lending capacity remains the same, it requires long term finance. This develops an uncatered gap in the market.

SEGMENT REPORTING

The Companys main business is to provide loans for the purchase or construction of residential units. All other activities revolve around the main business. Hence, there are no separate reportable segments, as per Ind AS 108 dealing with Operating Segments as specified under Section 133 of the Companies Act, 2013. Secondary segmentation based on geography has not been presented as the Company operates primarily in India and the Company perceives that there is no significant difference in its risk and returns in operating from different geographic areas within India.

RISKS AND CONCERNS

As a housing finance company, your Company is inherently exposed to various risks, including liquidity risk, interest rate risk, credit risk, rising levels of Non-Performing Assets (NPAs), and operational risks such as account takeovers. Intense industry competition, increasing borrowing costs, and narrowing interest spreads present significant challenges to maintaining consistent profitability.

Additionally, prevailing inflationary trends may adversely impact the affordability of housing for a large segment of end-users, potentially affecting loan demand and repayment capacity. The Company continues to monitor these risks closely and implements appropriate risk mitigation strategies to safeguard its financial stability and long-term growth.

RISK MANAGEMENT

The Company actively manages liquidity and interest rate risks arising from maturity mismatches between assets and liabilities through continuous monitoring and periodic review of maturity profiles. Credit risk is effectively mitigated through a robust credit appraisal system, defined exposure limits, and regular portfolio reviews.

Operating primarily in the mid-segment, the Companys borrower base consists largely of salaried individuals, which contributes to portfolio stability. Comprehensive due diligence measures—including CIBIL score checks, field verifications, and stringent legal and technical evaluations—have played a key role in minimizing incremental delinquencies. The Company also maintains a strong recovery mechanism, leveraging the provisions of the SARFAESI Act to support timely recovery efforts.

Operational risks are addressed by strengthening internal control systems and taking corrective action on observations made during internal audits, thereby ensuring continuous improvement in processes and compliance.

ASSET LIABILITY MANAGEMENT

The Company strictly adheres to the Asset-Liability Management System for Housing Finance Companies - Guidelines issued by the Reserve Bank of India. The Asset-Liability Management Committee (ALCO), a management-level committee, is responsible for monitoring and managing the Companys liquidity and interest rate risks. It analyses projected cash flows across various time buckets, comparing committed outflows with anticipated inflows to identify and address any mismatches.

The Committee also conducts periodic stress testing and adverse scenario analysis to evaluate the Companys resilience under unfavourable conditions. All incremental borrowings, in accordance with the Companys Borrowing Policy, are reviewed and deliberated upon during ALCO meetings to ensure prudent financial management and alignment with regulatory requirements.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has established an internal control system that is commensurate with the scale and complexity of its operations. These controls are designed to ensure timely identification and rectification of operational irregularities, while also providing an accurate and ongoing assessment of the Companys financial and operational position. Internal audits are conducted at regular intervals, and the recommendations made by internal auditors are reviewed and implemented to enhance systems and procedures.

The internal audit function is carried out by independent firms of Chartered Accountants, covering key operational and financial areas. Additionally, the Company has an in-house internal audit department responsible for conducting internal reviews. Both the Audit Committee and the Statutory Auditors are periodically updated on the findings of internal audits and the status of compliance. The Audit Committee also undertakes regular reviews of the internal control systems to ensure their continued effectiveness and alignment with evolving business and regulatory requirements.

BUSINESS SEGMENT OVERVIEW

Over the past 35 years, the Company has built a strong reputation nationwide as a reliable Housing Finance Company (HFC). Its diverse range of loan products under both Housing and Non-Housing categories is designed to cater to the varied financial needs of a broad customer base. The Companys product portfolio includes Individual Housing Loans for the purchase of new and resale properties, Composite Loans (for site purchase and construction), Mortgage Loans, Repair & Renovation Loans, and Construction Home Loans, among others.

During the year under review, the Company reported a total income of Rs 1,08,888 lakhs, compared to Rs1,06,964 lakhs in the previous year. Profit Before Tax (PBT) stood at Rs 20,637 lakhs, and Profit After Tax (PAT) at Rs 16,017 lakhs, against Rs20,391 lakhs and Rs15,116 lakhs respectively in the previous year.

The Company continued to focus primarily on Individual Loans. New loan approvals during the year amounted to Rs 1,91,546 lakhs, while disbursements totalled Rs 1,78,868 lakhs, as against Rs1,34,730 lakhs and Rs1,27,525 lakhs respectively in the previous year. As of March 31, 2025, the Retail Loan Portfolio stood at Rs 10,49,406 lakhs, compared to Rs10,27,973 lakhs as of the previous year-end.

CREDIT RATING

Your Company had received rating from CRISIL Limited and ICRA Limited for its various borrowing programmes as follows:

CRISIL Rating:

• For Commercial Paper programme of Rs 1,500 crores as A1+.

• For Long Term Bank Loan Programme of Rs 8,100 crores as AA+ (Stable).

• For Short Term Bank Loan Programme of Rs 1,000 crores as A1+.

• For Non-Convertible Debentures Borrowing Programme of Rs 1,355 crores as AA+ (Stable).

ICRA Rating:

• For Commercial Paper programme of Rs 1,500 crores as A1+.

• For Short Term Bank Loan Programme of Rs 1,000 crores as A1+.

• For Fund Based Long Term Bank Loan Programme of Rs 9,000 crores as AA+ (Stable).

• For Non-Convertible Debentures Borrowing Programme of Rs 1,355 crores as AA+ (Stable).

MARKETING

The Company markets its home loan products through multiple channels, including direct sales, Direct Selling Agents (DSAs), Direct Sales Teams (DSTs), and the distribution network of its subsidiary company. With a strong focus on both existing and prospective customers, the Company continues to enhance its outreach efforts. As of the reporting date, the Company operates through 72 offices (including the Corporate Office) and 5 satellite offices strategically located across the country. Throughout the year, targeted promotional activities were carried out in various regions, contributing significantly to the Companys marketing success and brand visibility.

HUMAN RESOURCES/ INDUSTRIAL RELATIONS

As of March 31, 2025, the Company employed a total of 553 individuals, all of whom have contributed meaningfully to the Companys growth and development. The manpower requirements at various offices are continuously assessed, and recruitment is carried out as needed to meet operational demands. The Company regularly reviews its business practices and human resource policies to enhance efficiency and improve workplace procedures.

RELATED PARTY TRANSACTIONS

The Related Party Transactions details are furnished in the Notes on Accounts forming part of the Accounts. None of the transactions with any of the related parties were in conflict with the interests of the Company. Transactions with related parties entered into by the Company in the normal course of business were placed before the Audit Committee. The Companys detailed policy on related party transactions is uploaded on the Companys website for the information of all the stakeholders.

DETAILS OF KEY FINANCIAL RATIOS

DISCLOSURE OF ACCOUNTING TREATMENT

There is no change in the accounting treatment in the Financial Year 2024-2025 as compared to Financial Year 2023-2024. CAUTIONARY STATEMENT

This Management Discussion and Analysis (MD&A) report contains forward-looking statements that reflect the Companys current expectations, objectives, projections, and estimates regarding future performance. These statements are based on certain assumptions concerning anticipated events and trends. While the Company believes these expectations are reasonable, actual results may differ materially due to a variety of factors beyond the Companys control. These factors may include, but are not limited to, changes in economic conditions, regulatory developments, market volatility, and natural or other unforeseen events. The Company does not undertake any obligation to update or revise these forward-looking statements and assumes no responsibility for any discrepancies between projected and actual outcomes arising from internal or external factors.