GIC Housing Finance Ltd Management Discussions

OVERVIEW OF THE INDIAN ECONOMY (SOURCE - the RBI annual report, the Union Budget FY 2025-26 highlights)

Indias economy in FY 2025-26 recorded strong growth of about 7.4%, reaffirming its position as the fastest-growing major economy. The expansion was driven by robust domestic demand, a buoyant services sector, and steady industrial activity. Services, particularly financial, real estate, and public administration, grew nearly 10%, while manufacturing and construction maintained healthy momentum supported by government-led infrastructure investments. Agriculture grew moderately due to uneven weather conditions, but overall investment activity remained strong, reflecting business confidence and improved credit quality. Inflation stayed broadly within the Reserve Bank of Indias target range, though food and energy prices created occasional pressures. On the external front, the current account deficit narrowed to around 1.3% of GDP, aided by resilient remittances and rising services exports, while foreign exchange reserves climbed to nearly US$ 687 billion, ensuring macroeconomic stability despite global uncertainties.

INDIAN ECONOMY FUTURE OUTLOOK (SOURCE- source-linked summary from IMF, a World Bank forecast extract, or an RBI policy perspective)

Indias economic outlook for FY 2026-27 remains positive, with growth projected between 6.5% and 6.6% by institutions such as the IMF and World Bank. The economy is expected to be driven by strong domestic consumption, resilient services exports, and government-led initiatives in infrastructure, semiconductors, and clean energy. The expansion of digital public infrastructure through platforms like UPI, Aadhaar, and ONDC continues to enhance productivity and financial inclusion, while Production Linked Incentive (PLI) schemes are attracting global manufacturers to invest in electronics and renewable energy. On the external front, free trade agreements with the UK and EU are likely to boost exports and strengthen Indias role in global supply chains.

At the same time, challenges persist. Elevated crude oil prices due to geopolitical tensions in West Asia are putting pressure on inflation and fiscal balances, with the fiscal deficit expected to hover around 4.5% of GDP. Employment gaps, particularly in rural areas, and skill mismatches in the workforce remain pressing issues. Environmental concerns such as water scarcity, pollution, and climate-related disruptions also pose risks to agriculture and urban sustainability. Despite these vulnerabilities, India is on track to reach a US$ 5 trillion economy by 2027, becoming the worlds third-largest economy. With disciplined reforms in land, labor, and capital markets, alongside investments in green energy and skill development, India is well-positioned to sustain its leadership in global growth.

HOUSING FINANCE INDUSTRY OVERVIEW (Source a World Bank housing finance

Indias housing finance industry in FY 2025-26 recorded steady growth, with Housing Finance Companies (HFCs) expanding their loan portfolios by about 13 15%, supported by strong demand for affordable housing and government initiatives such as Housing for All. Affordable Housing Finance Companies (AHFCs) grew faster, with portfolios rising nearly 14%, reflecting rising demand in Tier-II and Tier-III cities. Asset quality improved significantly, with gross NPAs falling to around 2.2%, compared to over 4% two years earlier, thanks to better collections and stable retail loan performance. Profitability also strengthened, with return on assets rising to 2.3%, aided by lower credit costs and healthy margins. Banks continued to dominate the housing finance market with nearly three-fourths share, while HFCs held about one-fifth.

Looking ahead to FY 2026-27, the industry is expected to grow at 15 17%, crossing 10 lakh crore in assets under management (AUM). Growth will be driven by affordable housing demand, urbanization, and government-backed Production Linked Incentive (PLI) schemes that indirectly support real estate and housing. Digital adoption, including AI-powered credit assessment and alternative data use, is set to transform lending practices. Institutional rental housing student housing, co-living, and senior living is also emerging as a new growth segment. However, challenges remain: rising funding costs due to global volatility, affordability pressures in metros, and environmental risks such as urban water scarcity. Despite these, the long-term outlook is strong, with EY projecting affordable housing finance to reach 67 trillion by FY 2030, making housing finance a key pillar of Indias economic growth story.

KEY CHALLENGES FACED BY HFCs

In FY 2025-26, Housing Finance Companies (HFCs) in India faced several key challenges despite overall growth in loan portfolios and improved asset quality. The most pressing issue was rising funding costs, driven by global volatility and higher interest rates, which squeezed margins and made borrowing more expensive. Competition from banks also intensified, as banks continued to dominate the housing finance market with nearly three-fourths share, leaving HFCs to fight for market space in niche segments like affordable housing. Another challenge was asset quality pressures in certain geographies, particularly where economic activity slowed or where borrowers were more vulnerable to income shocks. Although gross NPAs declined overall, localized stress remained a concern.

HFCs also struggled with affordability issues in metro cities, where property prices rose faster than income levels, limiting demand for middle-income housing loans. In rural and semi-urban areas, underemployment and skill mismatches affected repayment capacity, adding to credit risk. Regulatory compliance and the need to align with evolving RBI and NHB guidelines required significant operational adjustments, while digital transformation posed both opportunities and challenges smaller HFCs found it difficult to keep pace with larger players in adopting AI-driven credit assessment and digital lending platforms. Finally, environmental and climate-related risks, such as water scarcity and weather disruptions, indirectly impacted housing demand and repayment behavior in certain regions.

Together, these challenges highlighted the need for HFCs to strengthen risk management, diversify funding sources, and accelerate digital adoption to remain competitive in Indias evolving housing finance landscape.

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 1,08,322 lakhs, compared to 1,08,888 lakhs in the previous year. Profit Before Tax (PBT) stood at 15,877 lakhs, and Profit After Tax (PAT) at 15,449 lakhs, against 20,637 lakhs and 16,017 lakhs respectively in the previous year.

The Company continued to focus primarily on Individual Loans. New loan approvals during the year amounted to Rs. 2,52,664 while disbursements totalled Rs. 2,29,938 as against Rs. 1,91,546 and Rs. 1,78,868 lakhs respectively in the previous year. As of March 31, 2026, the Retail Loan Portfolio stood at Rs 11,23,185 compared to Rs. 10,49,406 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 1,500 crores as A1+. For Long Term Bank Loan Programme of 8,100 crores as AA+ (Stable). For Short Term Bank Loan Programme of 1,000 crores as A1+.

For Non-Convertible Debentures Borrowing Programme of 1,530 crores as AA+ (Stable).

ICRA Rating:

For Commercial Paper programme of 1,500 crores as A1+. For Short Term Bank Loan Programme of 1,000 crores as A1+.

For Fund Based Long Term Bank Loan Programme of 9,000 crores as AA+ (Stable). For Non-Convertible Debentures Borrowing Programme of 1,530 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 84 offices (including the Corporate Office), 7 hubs 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, 2026, the Company employed a total of 640 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 with 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.