godrej properties ltd Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

GLOBAL ECONOMY

It has been a near-normal year after two years of pandemic induced challenges but the global economy continues to face headwinds of rising inflation and tapered growth. According to The World Economic Outlook (WEO) update, the world economic output growth slowed down to 3.4% in CY2022, after growing by 6.0% in CY2021. The rise in central bank rates to fight inflation and Russias war in Ukraine continue to weigh on economic activity with its impact likely to spill over to CY2023 as well. The rapid spread of COVID-19 in China also dampened growth in CY2022, but the reopening has paved the way for a recovery. Stronger-than-expected private consumption and investment amid tight labor markets and greater-than- anticipated fiscal support helped the major economies.

The IMF expects growth in CY2023 to be 2.8% with a gradual pick-up in CY2024. The economic activity is expected to remain sluggish mainly due to slow down in advanced economies. For advanced economies, growth is projected to decline sharply from 2.7% in CY2022 to 1.2% in CY2023 amid financial sector turmoil, high inflation, ongoing effects of Russias invasion of Ukraine, and three years of COVID. The growth in US slowed down in the second half of the year to end at a mere 0.9% in CY2022 and is expected to remain at 1.0% in CY2023 due to the steeper path of Federal Reserve rate hikes. Interest rate risk, the root cause of financial sector turmoil could mean a tough road ahead. Growth in the Euro area is expected to bottom out at 0.7% in CY2023 reflecting the effects of faster rate hikes by the European Central Bank, lower wholesale energy prices, and additional announcements of fiscal purchasing power support in the form of energy price controls and cash transfers.

For emerging market and developing economies, growth is projected to rise modestly, from 3.9% in CY2022 to 4.0% in 2023. Growth in emerging and developing Asia is expected to rise in CY2023 to 5.3% after the deeper- than-expected slowdown in CY2022 to 4.3% attributable to Chinas economy. Growth in China is projected to rise reflecting rapidly improving mobility and full reopening.

Indias economy on the other hand, will slow down from 6.8% in CY2022 to 5.9% in CY2023 as per world economic outlook, impacted by rising global inflation and the resultant interest rate hikes.

Global inflation is set to fall, although more slowly than initially anticipated, from 8.7% in CY2022 to 7.0% in CY2023 as the massive and synchronous tightening of monetary policy by most central banks should start to bear fruit. Commodity prices have generally seen a correction since October 2022. Oil prices also are projected to fall by 24% by IMF in CY2023, whereas non-fuel commodity prices are expected to remain broadly similar.

There are numerous downside risks to weigh on outlook like stalling recovery in China, escalation of war in Ukraine, sudden repricing in financial markets, and geopolitical fragmentation. Also, high post-pandemic debt burden will pose to be an ongoing challenge for many countries over the next few years.

The upside though can come through pent-up demand boost fueled by excess private savings from pandemic fiscal support and in many cases, still-tight labor markets and solid wage growth; or through faster disinflation as easing in labor market pressures in some advanced economies due to falling vacancies could cool wage inflation.

INDIAN ECONOMY

The Indian economy continues to remain fairly resilient in the last year despite the global headwinds.However, it will see a moderation in growth in FY24 to 5.9-6.3% as per various estimates as against 6.9% in FY23. Rising borrowing costs and slower income growth will weigh on private consumption growth, and government consumption is projected to grow at a slower pace due to the withdrawal of pandemic-related fiscal support measures. Despite this, India will remain one of the fastest growing economies in a challenging global environment.

Indias GDPgrew by 6.9% in FY23 due to steadfast domestic demand, governments unwavering focus on infrastructure spending and low base effect. Volatile commodity prices have impacted profitability, particularly of MSMEs, while export-oriented sectors face headwinds from a slowdown in their major markets. The headwinds of higher input cost and challenging global environment will continue in FY24 also.

The increase in repo rate by RBI by 250 bps since the beginning of FY2023 to contain inflation is expected to slow down the growth rate as the full effect of rate hikes will be felt in FY2024. RBI though is expected to continue its accommodative stance to growth as seen in its April 2023 Monetary Policy Committee meeting where rates were maintained. Indias banking system has been largely insulated from recent failures of certain banks globally. Interest rate risk, the root cause of stress at some banks in the US, is relatively lower for Indian banks. Loans which form about 70% of asset book of banks in India are largely floating in nature. Also, the base interest rates in India are higher than global peers, making the sensitivity of investments to mark-to-market losses relatively lower.

Consumer inflation is expected to moderate from 6.8% in FY23 to 5.2% in FY24, owing to a high-base effect. A good rabi harvest would help cool food inflation and a slowing economy to moderate core inflation.

The World Bank expects the government to meet its fiscal deficit target of 5.9% of GDP in FY24 and narrow the current account deficit to 2.1% from an estimated 3% in FY23 on the back of robust service exports and a narrowing merchandise trade deficit.

While the short-term outlook seems to be challenging given the rising interest rates, external supply shocks and geopolitical tension, we do believe the government is doing the right things to ensure a sustainable growth path for the country. The union budget presented this year was very supportive of the long-term growth of the real estate sector in India through its focus on urban infrastructure and the digital economy. The governments sharply expanded capital expenditure target for the year is expected to create job opportunities and higher economic activity.

REAL ESTATE SECTOR

The post-pandemic picture for real estate sector is a paradigm shift from before. The pandemic has reinstated the importance of home ownership and the attitude of customers towards residential properties has seen a substantial shift. Preference for larger sized apartments, inclination towards reputed developers and a rising demand for townships projects are just some of the emerging trends.

Fiscal 2023 was a milestone year for the Indian Real estate sector with all-time high sales. The sector showed healthy growth on the back of a high base achieved in fiscal 2022. The demand pick-up seen in the second half of fiscal 2021 has continued into fiscal 2023 and is expected to continue in fiscal 2024. The number of launches are also increasing and touched a decadal high last year, inventory is continuing to show a decline or stability across Tier-1 cities, indicating a healthy demand momentum.

While the residential segment witnessed strong performance, commercial office sector continues to remain sluggish with demand not yet reaching the pre-pandemic levels. The challenges to office space demand has been the work from home trend and slowdown in global economic growth. The global slowdown directly impacts sectors like IT/ITeS which is the major occupier of office space in India. Retail real estate sector though, is back to full swing with consumption recovering beyond pre-pandemic levels and should continue the momentum.

RESIDENTIAL REAL ESTATE MARKET

The residential market has sustained the momentum seen in the latter half of fiscal 2022. The robust performance of the sector during last year signifies the strength of the underlying demand for property. The demand is driven by healthy economic recovery post pandemic, healthy affordability compared to historic levels and other favorable macroeconomic factors. The industry though faced headwinds of steep rise in raw material costs, consumer inflation and a sharp increase in borrowing costs.

Heightened savings during the lockdowns, relatively little income disruption in the mid and high-income categories and a comparatively strong economic growth outlook have sustained demand in the Indian residential market.

With the 250 BPS repo rate hike by central bank to fight inflation, and consequent increase in home loan rates during the fiscal 2023, residential real estate demand was uncertain. The same was seen in other markets around the world. However, residential demand in the country has not only remained resilient but surged to a nine year high in terms of annual sales in CY2022 as per property consultant Knight Frank¹. The housing sales were 41% higher yoy in terms of units sold in CY22 as against CY21.

According to the Knight Frank affordability matrix, the affordability declined in CY22 as against CY21 due to the rate hikes and price increase. However, all markets except Mumbai, are recorded to be well below the threshold of comfortable affordability of 50%, a level exceeding which banks rarely underwrite a home-loan. Mumbai was the only city that recorded a higher than threshold affordability ratio at 53%, although it has improved the most since CY2010. The affordability had increased dramatically since CY2015 due to declining interest rates. An EMI/Income ratio of over 50% is considered unaffordable according to the matrix and most cities had witnessed a dramatic increase in affordability in this period due to decadal low interest rates and decline in home prices. While the trend has reversed, the affordability continues to remain better than historic levels.

Healthy absorption in residential units coupled with rise in input costs led to an increase in prices in many micromarkets. Across the 4 major markets of NCR, MMR, Bengaluru and Pune, the prices have increased by 7% on average in CY22. If this significant sales velocity is sustained in residential realty, the upward price revision may continue as the median home loan rates have still not breached the pre pandemic levels of CY2019.

The requirement for work from home setups has also emerged as a factor influencing homebuyer preferences. The demand for real estate is also seen beyond Tier-1 cities and it is likely to lead the sectors growth in the coming years.

The resurgence in demand has also put residential development into overdrive with the annual volume of units launched, also reaching nine-year highs. Notably, the inventory for the sector, which had seen a correction every year in the last 9 years has now stabilized. However, with improved demand inventory in terms of quarters-to-sell (QTS) is still continuing to show an improvement. QTS is lowest at 7.2 at the end of CY22, an improvement from 10 a year ago, and denotes a healthy market scenario.

The industry continues to consolidate with residential developments steadily shifting into the hands of stronger developers who have been able to weather the economic storm created by the pandemic. As per credit rating agency CRISIL Ratings limited², the share of large listed developers has increased to ~24% in fiscal 2023 from -14% before the pandemic and their share will continue to increase as share of new launches by these large listed developers was 40- 45% in last fiscal.

NCR

NCR market continued to witness a substantial increase in demand as upward trajectory of home-buying accentuated by the pandemic continued throughout the year. The region recorded sales of 58,460 units in CY2022, a 67% sales growth over CY2021. There has been a sizeable jump in the demand for premium residential products which has largely remained unaltered by the interest rate hike. The pandemic led to higher demand for larger homes in NCR region, with share of projects with ticket sizes of higher than Crore at 50% in H2 CY2022 from 37% in H2 CY2021 and 31% in H2 CY2020.

Buoyed by a sustained demand scenario and limited availability of ready to move in inventory, developers have been scaling up new launches. In CY2022, 62,233 units were launched, more than three times the launches seen in CY2021 albeit on a lower base. Gurugram comprised the lions share of the total launch pie due to strong inherent demand for residential products in its micro-markets. Gurugrams group housing and luxury high-rises have become homebuyer favourites.

Despite buoyancy in home sales in CY2022, the unsold inventory in NCR witnessed a 5% YoY growth to 100,959 units. This is largely due to the infusion of new supply. Limited availability of ready to move in inventory contributed to many new projects being launched in the market. Despite increase in unsold inventory, QTS has reduced to 8.6 in CY22 from 13.7 in CY21 mainly due to demand fillip.

MMR

On the back of sustained demand, the Mumbai residential market has logged recorded high sales of 85,169 units in CY22, a YoY growth of 35%. Notwithstanding several hurdles like the implementation of metro cess, effectively raising the stamp duty by 1% and rise in housing prices, the market shows strength. Strong consumer sentiments supported by a rise in income levels, and need for house ownership are key drivers for residential sales in the Mumbai market.

To make the most of the momentum, developers quickly sprung into action by launching 90,434 units in CY2022 recording a 29% YoY growth. Nonetheless, developers remain cognizant of the consumer sentiment and affordability. 75% of the supply added in CY2022 are in suburban markets like the Western Suburbs, Thane, Peripheral Central Suburbs and Central Suburbs.

Unsold inventory has risen by 4% YoYin CY2022 on account of the massive supply added in the market. However, as a result of strong sales volumes, the quarters to sell has reduced from 11 quarters in CY2021 to 8.6 quarters in CY2022.

BENGALURU

CY2022 remained vibrant for Bengalurus residential market as residential sales grew by 40% with 53,363 units sold. Inline with past trends, South Bengaluru continued to remain the most popular micro-market as demand remains steady due to the proximity to prominent tech parks and employment clusters located at Electronic City and Outer Ring Road (ORR). East Bengaluru is another sought after region for demand, which was primarily concentrated in Whitefield, K R Puram, etc. has now gradually expanded to peripheral areas of Hoskote also.

Launches also grew by 29% YoY in CY2022 but slowed down during the second half of the year as one of the main demand drivers i.e. health of Information Technology sector which translates into job creation and salary growth, indicated signs of slowdown due to global macroeconomic headwinds. Thus developers have remained cautious of new launches.

Due to strong demand and softening in launches, the volume of unsold inventory reduced to 57,398 units in CY2022, a YoY reduction of 15%. As a result, QTS for Bengaluru has narrowed to 5 quarters, from 8.7 quarters a year ago.

PUNE

The Pune residential market has recorded substantial growth over the last 2 years. The annual sales volumes rose by 17% YoY in CY2022 registering sales of 43,410 units. Although a large section of homebuyers comprises the migrant workforce, primarily salaried employees, their outlook towards the market continues to remain optimistic despite multiple rate hikes affecting the affordability.

Annual launches recorded a marginal drop of 5% YoY accounting for a supply of 38,640 units in CY2022 due to strong supply volumes recorded in CY2021. Consequently, Unsold Inventory has dipped 9% YoY to 46,042 units in CY2022. Quarter to sell has dipped from 6.3 quarters in CY2021 to 4.6 quarters in CY2022 indicative of the strong market demand.

OFFICE MARKET

CY2022 was a volatile year for the Indian office market which was dented by fears of global economic slowdown. These global headwinds not just weighed down growth projections forthe Indian economy, it also weighed on some leasing transactions particularly in Q4CY22. Nevertheless, the Indian office space market concluded CY2022 with a significant 36% YoY growth in transaction volumes to 51.6 million sq. ft. and a 28% YoY growth in completions to 49.4 million sq. ft. Consequently, the occupancy levels have remained steady at 17.1%.

Bengaluru continued to be the largest office market with transaction volume of 14.5 million sq. ft. followed by NCR, a distant second, with 8.9 million sq. ft.

The Other Services sector, which include e-commerce, education, healthcare and logistics companies among others, took up the most office space at 30% or 7.9 million sq. ft. of the total space transacted during the period. The Information Technology (IT) sector was the second most prolific sector during H2 CY2022 accounting for 22% of the area transacted during the period. While significant, the current periods share still marks the sectors lowest share since HI CY2017 as IT companies continue to maintain a primarily hybrid work environment. Moreover, the fortunes of the Indian IT sector are closely aligned with their western clients and their recent earning downgrades have kept the IT sectors expansion plans at bay.

Office completions staged a recovery in line with transactions with Bengaluru and Hyderabad adding highest volume of 15.6 million sq. ft. and 11.2 million sq. ft. respectively and making up more than 50% of area addition.

Rental levels were stable or grew across all markets in CY2022. Bengaluru and Pune office markets grew the most during CY2022 at 11% and 7% YoY respectively.

The cost of debt has also inched up for the commercial developers or operators. Nevertheless, these players still remain healthy. As per credit rating agency CRISIL Ratings Limited³ , commercial office players remain resilient with comfortable Debt/EBITDA metrics of below 5 times and healthy DSCRs.

While the Indian economy recovers gradually, global economic cues remain tense as inflation continues to subdue growth. With the pandemic having little material impact on businesses, the evolving story of global economic growth could have a greater bearing on market traction going forward.

BUDGET 2023 - TAKEAWAYS

The union budget presented this year was supportive of the long-term growth of the real estate sector in India through its focus on urban infrastructure and the digital economy. The Governments rising focus on infrastructure capex will create a backdrop of opportunity for the real estate sector. Some of the key measures include:

Housing for All

The Government allocated Rs.79,000 Crore, 66% higher than last years allocation, under the Pradhan Mantri Awas Yojna (PMAY) initiative which will be used for both urban and rural markets. The government plans to complete its target of over 4 Crore houses across both urban and rural markets, which will be allocated to persons eligible under the scheme. In addition, it plans to make the land and construction approval process more efficient.

Urban Development Plan

The Real estate sector is expected to benefit from emphasis laid on development and urban planning in Tier 2 and Tier 3 cities in the budget. The National Housing Bank (NHB) will oversee the proposed Urban Infrastructure Development Fund (UIDF). This will help public agencies develop infrastructure in Tier 2 and Tier 3 cities. A Rs.10,000 crore budget has been proposed for this fund.

Furthermore, five centres of excellence for urban planning have been proposed, which will provide the sector with a channel to hire trained professionals. A committee of urban planners, economists, and institutions will be formed to make recommendations on urban sector policies, capacity building, planning, implementation, and governance.

Municipal Bonds

The budget also proposed property tax reforms to provide cities with incentives to improve their credit ratings for municipal bonds. These bonds have the potential to alleviate urban infrastructure woes while also improving real estate sentiment in these areas.

BUDGET 2023 - KEY TAKEAWAYS FOR CLIMATE CHANGE

The Union Budget FY 2023-24 promises sustained economic growth through its vision for the Amrit Kaal Blueprint for an empowered and inclusive economy. The focus is on sustainable growth for continued recovery from the global economic slowdown, caused due to the COVID-19 pandemic and the Russia- Ukraine war. The multi-pronged approach adopted by the Budget includes targeted capital investment, with a thrust on green infrastructure, to help facilitate GDP growth. There is a 33% increase in capital investment outlay, and an estimated GDP growth of 5.9-6.2% forecasted for FY 2023-24. The thrust on the infrastructure sector to drive growth is also evident in the 66% increase in the outlays for the Pradhan Mantri Awas Yojna (PMAY), setting up of the Urban Infrastructure Development Fund (UIDF), and many other sector-linked initiatives.

Green Growth is one of the 7 priority areas of the Budget FY 2023-24. The initiatives for the same are spread across industries including agriculture, Oil and Gas, Infrastructure, Transport, etc. to enable inclusive and sustainable growth. The recently launched Hydrogen Mission with an outlay of Rs.19,700 crores⁴ , will aide Indias transition to a low carbon economy. Under the Galvanizing Organic Bio- Agro Resources (GOBAR)-Dhan Scheme an investment of Rs.10,000 crores has been estimated, to facilitate circular economy through the setting up compressed biogas plants. Whether it be through setting of Bio-Input Resource Centres, or through increasing battery storage capacity, infrastructure development is a major focus area of Green Growth⁵.

At the 26^th session of the Conference of the Parties (COP-26) to the United Nations Framework Convention on Climate Change (UNFCCC) held in 2021, India had announced very ambitious climate targets. Indias revised targets for 2030 include establishing 500 GW of non-fossil energy capacity; fulfilling 50% energy demand through renewables; reducing carbon intensity of economy by 45% over 2005 levels; and achieving carbon neutrality by 2070⁶ . At the COP-27 held in Sharm El-Sheikh in Egypt, the switch was towards implementation of climate targets from pledging. Adaptation agenda was highlighted vis-a-vis integration of technology. Funding for achieving climate targets and promoting development of low carbon transition models was encouraged. Carbon credits and setting up of carbon markets to aid low carbon transition was promoted ⁷. To facilitate the countrys net-zero transition, energy goals and energy transition, there is a provision of Rs.35,000 crores by the Union Budget for FY 2023-24. Furthermore, there is an Rs.20,700 crore outlay for renewable energy grid integration and evacuation from Ladakh. Along with fiscal allocations, policy changes such as regulatory framework for setting up of carbon trading in India as per the provision of the Energy Conservation (Amendment) Bill (2022), are directed towards implementation and achieving of Indias climate targets.

The Union Budget FY 2023-24 strategizes integration of technology, sustainability and economic growth. It strives towards job creation via investment in clean technologies such as renewable energy, clean fuels, sustainable agriculture practices and more. The budget outlays are targeted towards green recovery and achieving climate targets, in an inclusive and wholistic manner.

IMPACT OF CLIMATE CHANGE ON REAL ESTATE SECTOR

Buildings are the fourth highest emitters globally after power, transport and industry. Global emissions from buildings increased from 2.91 Gt C0₂ in 2019 to 2.97 Gt C0₂ in 2022⁸. 11% of these GHG emissions result from manufacturing of raw materials of hard-to-abate industries such as steel and cement. The remaining are from the onsite emissions through electricity consumption, mainly for lighting and air conditioning. Enormous emissions reduction potential remains untapped due to the continued use of fossil fuel-based assets, lack of effective energy-efficiency policies and insufficient investment in sustainable buildings⁹.

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 consumption¹⁰. With Indias ambitious climate targets such as Net-Zero by 2070, the Indian real estate sector must move swiftly and efficiently. As climate change continues to adversely impact economies and the sector, both physical and transition risks have the potential to negatively affect assets, either directly or indirectly, and the markets with which those assets interact.

The value of real estate portfolios is susceptible to several risks, such as damage to buildings from extreme weather events brought on by climate change, which can have both chronic (steady long-term) and acute (severe short-term) effects depending on the location or attempts to combat climate change and make the transition to a low-carbon economy. The effects of climate change call for radical action, as we observe in real time the rising temperatures, sea levels, and extreme weather conditions. Furthermore, environmental risks havea negative impact on the provision of safe, healthy, and decent working conditions as well as the availability of jobs. The risks to occupational health and safety are getting worse due to ongoing climate change. High temperatures are thought to have contributed to the loss of 1.4% of all working hours in 1995, and research indicates that if climate change is not addressed and the temperature has risen by 1.3?C by 2030, a portion of the total productivity loss of 2.2%, or 80 million full-time jobs, will be lost¹¹. Real estate companies must quickly adopt solutions that can revolutionize the industrys strategy for preparing its buildings, operations, employees, products, clients as well as the general population for profound changes after realizing their role in climate change.

There has been a significant increase in investment at a global level towards reducing the energy intensity of buildings, over the past years. The real estate sectors commitment to reducing its impact on the climate is unquestionably a step in the right direction. Government, policymakers, investors, and the public are not only adopting new perspectives on climate change, but also taking ambitious steps to mitigate the same. With the development of tools to promote sustainable building practices and the adoption of green building certifications, more jurisdictions are aligning their building operations to comply with the Paris Agreement. The increase in investment is a welcome news, but it also emphasizes the need to collaborate with more external partners to effectively use technology to guarantee fluidity, auditability, and transparency.

OPPORTUNITIES Housing Demand

The pandemic has nudged a lot of fence-sitters to convert into first-time home buyers and existing ones to upgrade to larger homes by re-establishing the security that homeownership offers, resulting in rising housing demand across segments. An expected economic recovery along with the belief of housing prices bottoming out amongst consumers and rising income levels are some of the factors which will drive the housing demand going ahead. Hybrid working models will also continue to drive demand for larger homes. Employers are expected to continue to offer flexibility to their employees in order to attract and retain talent.

Sector Consolidation

The highly fragmented Indian real estate sector has been in a prolonged consolidation phase from the past few years and the pandemic has been one important factor pushing weaker players out of business. The disruptions in the real estate sector have ensured that no new player has an easy entry into the sector. As the sector moves towards fewer big players in each region, the consolidation presents a lucrative opportunity for the existing real estate developers to cater to the rising housing demand.

Affordable Housing

Affordable housing continues to remain a significant opportunity for developers and key focus area of the government. While the tax benefit for first-time homebuyers and tax holiday for developers in affordable housing segment was rolled back in Budget 2022, we believe it will not deter homebuyers decision of purchasing homes and demand will continue to be strong in affordable housing segment. Interestingly, the share of launches in the affordable segment across the top 7 cities of India, has dropped from 26% in CY2021 to 20% in CY2022, according to ANAROCK Research. The affordable housing segment could see a meaningful uptick in demand with an expected economic recovery and rising income levels.

Digital Real Estate Sales

Digital marketing has emerged as an important tool for real estate developers for their sales and customer outreach. Post-pandemic, the marketing activities are not just limited to tap new customers or brand recognition, but establishing a personal touch through digital means. With the tech-enabled tools to close real estate purchases online, developers have been able to record healthy sales even during the lockdown. Digital collaboration tools can be leveraged by the developers to interact with potential customers, showcase project brochures, facilitate virtual site tours, and focus on NRIs to propel the sales. Emerging tools such as virtual reality, augmented reality, Al- powered chatbots are being extensively used to establish personalized services with prospective customers. Going ahead, it will be imperative for the developers to adapt to a tech-savvy future and the proportion of real estate business generated online is expected to only rise further.

THREATS AND CHALLENGES Regulatory Hurdles

Real estate sector is a highly regulated sector and any unfavorable changes in government policies and the regulatory environment can adversely impact the performance of the sector. There are substantial procedural delays with regards to land acquisition, land use, project launches and construction approvals. Retrospective policy changes and regulatory bottlenecks may impact profitability and affect the attractiveness of the sector and companies operating within the sector.

Monetary Tightening and Funding Issues

There has been a contrasting trend in real estate lending over the past few years wherein reputed, low leveraged developers continued to enjoy easy access to liquidity as the lenders remained selective and weaker developers struggled with limited sources of capital. Real estate sector performance is closely linked to economic recovery and its monetary policies. The Reserve Bank of India has so far maintained accommodative stance. Going ahead, we expect to see monetary policy remain tight and gradually ease as the central bank tries to support the economic recovery and also balance inflation. A nascent economic recovery along with rising interest rates could impact the real estate sector in the near term as cost of housing loans shoots up and rise in the cost of funding for the developers, who are already facing margin pressure due to commodity cost inflation.

Shortage of Labour and Technology

Being the second largest employer in the country, the construction sector is heavily dependent on manual labour. During the pandemic, the sector was badly hit due to labor availability issues which affected the project completion timelines. Hence, there is a need for development of technologically less labour intensive alternative methods of construction.

ABOUT GODREJ PROPERTIES LIMITED

Godrej Properties Limited (GPL) is the real estate development arm of the Godrej Group, which was started in 1897 and is today one of Indias most successful conglomerates. Godrej Properties brings the Godrej Group philosophy of innovation, sustainability, and excellence to the real estate industry. Each Godrej Properties development combines a 126-year legacy of excellence and trust with a commitment to cutting- edge design and technology. Throughout its operations, GPL aims to deliver superior value to all stakeholders through extraordinary and imaginative spaces created out of deep customer focus and insight. GPL has always embraced the notion that collaboration is the essence of excellence. To that end we have worked with the best architects and contractors within India and around the globe to deliver our projects. By bringing together the best talent in the global real estate sector, GPL works to create developments that will last into the future and foresee the needs of every resident and community

A. Leveraging the Godrej Brand

We believe that the ‘Godrej brand is instantly recognizable across India due to its long standing presence in the Indian market, the diversified businesses in which the Godrej Group operates and the trust it has developed over the course of its operating history. We believe that the strength of the ‘Godrej brand and its association with trust, quality and reliability help us in many aspects of our business.

These include entering into joint development agreements, expanding to new cities and markets and formulating business associations. GPL has also ventured into plotted developments in Tier-2 cities which exhibit good sales potential. Our brand has helped us build deeper relationships with our customers, service providers, process partners, investors and lenders all of which has led to us acquiring a strong position within the sector. In addition, GPLs association with the Godrej Group provides access to several land parcels owned by Godrej Group companies significantly enhancing the scope of our development portfolio. GPLs binding arrangements with Godrej & Boyce appointing GPL as the development manager for developing all its lands in Vikhroli further provides an opportunity to enhance the scope of our portfolio.

B. Sales Momentum

The Company posted its best ever sales performance in FY2022-23 in terms of the value and volume of real estate sold, despite a higher base of FY2021-22, which was also a year of record sales for GPL. FY2022-23 is the 6^th consecutive year of highest ever annual sales for GPL which is a testimony to the strong brand and superior product offerings. This achievement was on back of both an improving project mix as well as strong volume growth of 40%. Your company is the only developer to achieve a booking value of more than Rs.2,000 Crore in a year across each of the 4 large markets of NCR, MMR, Bengaluru and Pune. Booking value in each of these 4 large markets was the highest ever achieved for your company.

The momentum picked up significantly in H2, including our strongest quarter ever in Q4 FY2022-23 which contributed Rs.4,051 Crore i.e. 33% of ouryearly booking value. This was due to 12 new project or phase launches in Q4 FY2022-23 against 12 in first 9 months of FY2022-23.

With the risk of the pandemic seeming behind us, we believe that a recovery in the real estate sector, our healthy balance sheet and a strong project pipeline will help us accelerate the sales momentum in the year ahead. Below is a brief of our performance in key markets.

NCR

NCR market continued to be the highest contributing region for GPL in FY2022-23 with another year of record sales, backed by the strong response to the new launches and healthy sustenance sales. The company sold real estate covering 3.59 million sq. ft., down by 8% YoY for a booking value of Rs.3,583 Crore, up by 10% YoY. The strong sales performance was backed by a few strong project and phase launches and continued healthy sales from existing projects.

One of the prominent highlights for the year was Godrej Woods in Noida which has been amongst GPLs most successful residential projects with sales of Rs.732 Crore over 0.58 million sq. ft in FY2022-23. Godrej Green Estate, Sonipat, a new plotted development project was another top contributor in the NCR market for the year and witnessed sales of 0.67 million sq. ft. with a booking value of Rs.535 Crore, and with 68% of launched inventory sold in the year of its launch. Godrej South Estate witnessed sales of over 0.18 million sq. ft. with a booking value of Rs.423 crores in FY2022-23, led by strong response to new phase launch during the fourth quarter.

Godrej Nature+ and Godrej Nest witnessed booking value of more than Rs.300 crores each in FY2022-23, while two more projects Godrej Connaught One and Godrej Meridien witnessed booking value of more than Rs.200 crores each in FY2022-23.

Mumbai

Total sales in Mumbai stood at approximately 2.25 million sq. ft. with a booking value of Rs.3,057 Crore, up 79% YoY. The robust sales performance was achieved with seven new project/phase launches during the year and healthy sales traction from our existing projects. Our new project Godrej Horizon witnessed total sales of 0.48 million sq. ft. with a booking value of Rs.1,047 Crore during the year and making it one of the most successful projects for us. Our new project Godrej Ascend witnessed total sales of 0.74 million sq. ft. with a booking value of Rs.830 Crore during the year with 60% of launched inventory getting sold in the year of its launch. Godrej Urban Park and Godrej City witnessed booking value of more than Rs.200 crores each in FY2022-23.

Bengaluru

Total sales in Bengaluru stood at approximately 3.59 million sq. ft. with a booking value of Rs.2,243 Crore, up 233% YoY. The robust sales performance was achieved with four new project/phase launches during the year and healthy sales traction from our existing projects. Our new project Godrej Splendour, witnessed total sales of 1.4 million sq. ft. with a booking value of Rs.980 Crore during the year and making it one of the most successful projects for us with 65% of launched inventory getting sold in the year of its launch. Godrej Ananda, witnessed total sales of 0.98 million sq. ft. with a booking value of Rs.500 Crore during the year with a new phase launch during FY2022-23. Godrej Park Retreat witnessed total sales of 0.59 million sq. ft. with a booking value of Rs.373 Crore during the year.

Pune

Total sales in Pune stood at approximately 3.03 million sq. ft. with a booking value of Rs.2,126 Crore, up 16% YoY, building on an excellent fiscal 2021-22. The robust sales performance was achieved with seven new project/phase launches during the year and healthy sales traction from our existing projects. Our new project Godrej Woodsville, witnessed total sales of 1.07 million sq. ft. with a booking value of Rs.678 Crore during the year and making it one of the most successful projects for us with entire launched inventory getting sold in the year of its launch. Building on the excellent response for series of Hillside phases at Mahalunge, GPL launched Godrej Hill Retreat (Hillside 8), and all combined phases of Mahalunge witnessed total sales of 0.83 million sq. ft. with a booking value of f643 Crore during the year. Combined phases of Manjri witnessed total sales of 0.69 million sq. ft. with a booking value of Rs.476 Crore during the year. Combined phases of Mamurdi also witnessed sales of more than Rs.200 crores in FY2022-23.

Others

Total sales in other geographies stood at approximately 2.77 million sq. ft. with a booking value of Rs.1,223 Crore, up 210% YoY. Godrej Garden City witnessed total sales of 1.24 million sq. ft. with a booking value of Rs.541 Crore during the year. Our new plotted project in Nagpur, Godrej Orchard Estate witnessed total sales of 0.96 million sq. ft. with a booking value of Rs.384 Crore during the year. Godrej Seven witnessed total sales of 0.45 million sq. ft. with a booking value of Rs.227 Crore during the year.

C. Commercial Portfolio

On the commercial sales front, weve been able to maintain steady sales in FY2022-23 and monetization of the older commercial projects remains a priority for your Company. GPL sold 0.15 million sq. ft. with a total booking value of Rs.123 Crore which mainly comprised sales of 0.14 million sq. ft. at Godrej Eternia with a booking value of Rs.116 Crore.

D. Business Development

While the pace of new project additions in the first half of the financial year was a little slow, we added a large number of projects during the second half of FY2022- 23 with a total of 18 new residential projects with high economic interest, total saleable area of ~29 million sq. ft. and an estimated revenue potential of approximately Rs.32,000 Crore, more than double the guidance of Rs.15,000 Crore given at the start of the year in terms of estimated booking value and growing more than 250% of last year. This was the best ever year for your company for business development. These projects are strategically located and will support our efforts to maintain rapid growth rates while substantially improving the margin profile of our company as most of these projects are 100% owned projects.

The pandemic-led consolidation in the real estate sector continues to offer ample opportunities for players like GPL to build on its business development momentum. With the availability of growth capital, we intend to focus on opportunistic investments and scale up our project portfolio in FY2023-24. Below is the list of residential deals signed by GPL in FY2022-23.

Particulars	Estimated Saleable Area (million sq. ft.)	Expected Booking Value ( Rs. Cr)
Nagpur Plotted	1.52	575
Godrej Tranquil Extn, MMR	0.70	1,000
Carmichael Road, MMR	0.12	1,200
Indiranagar Extension, Bengaluru	0.60	750
Kandivali, MMR	3.72	7,000
Mahalaxmi, MMR	0.76	3,500
Sector 89, Gurugram	2.90	3,000
Sector 49, Gurugram	1.60	2,500
Mundhwa, Pune	2.20	2,000
Sec 146 A, Noida	1.60	2,000
Sec 146 B, Noida	1.60	2,000
Sec 41 Kurukshetra, NCR	1.40	550
Manor, Palghar, MMR	1.20	500
Khalapur Plotted	1.90	600
Chennai Plotted	1.60	400
RK Bungalow, Chembur, MMR	0.20	500
Old Madras Road (OMR), Bengaluru	4.50	3,250
Koregaon Park, Pune	0.79	1,000
Total	28.91	32,325

E. Customer Centricity

FY2022-23 demonstrates GPLs commitment to delivering outstanding customer experience. Our performance, measured through the Net Promoter System, which we adopted in 2018, reflects the impact of our customer experience and the customer advocacy it creates. In FY2022-23, we delivered the highest NPS since the systems adoption in 2018.

Survey Year	FY2018- 19*	FY2019- 20*	FY2020- 21*	FY2021- 22	FY2022- 23
Relationship NPS Survey Responses	9,306	12,283	8,857	8,806	13,332
Combined relationship NPS	28%	61%	42%	55%	65%

*NPS scores forFY2018-19, FY2019-20, and FY2020-21 are revised to only account for completed responses to the survey and discard any customer response that was filled but not submitted.

In addition, we continued upon our internal measure of performance that includes not only the NPS scores from the final year relationship surveys, but also from the half- yearly relationship surveys and episodic surveys that get triggered during customers key moments of truth, namely, onboarding, registration, site visit, and handover. This measure also includes NPS performance in Legacy projects: projects, where we have handed over more than 70% of the inventory and the operational matters of the project, are being handled by the respective residents societies/ associations. As per the new internal MOP, our cumulative NPS for FY 2022-23 across all the above-mentioned surveys was 56% as compared to 40% in FY2021-22.

We sharpened our focus towards actualizing our Purpose to bring Joy to the customers. The major highlights of our efforts for enhanced customer experience in FY2022-23 are as follows:

• The GPL Mobile App:

In FY2021-22, we deployed a one-of-a-kind unique self- care solution for servicing all our post-sales customers, which is the Godrej Properties Mobile App. The Mobile App empowers customers to manage all aspects of their purchase at their fingertips, whenever, wherever.

Demonstrating Customer Delight, the Godrej Properties Ltd Mobile App is consistently rated.

4.7 on Playstore (700+ ratings) and 4.6 on Appstore (200+ ratings).

The ratings resonate with the voices of over 67%+ of our existing customers, who have started using the App.

• Improving experiences during key moments of truth:

a. Demonstrating agility and scale in Registrations:

We facilitated Agreement registration for 12000+ customers. In FY2022-23, we also organized mass registrations across our projects where more than 100+ customers of a project completed their registration on a single day. Through our dedicated and focused approach to Agreement registrations in the past two years, we have been able to reduce the number of days from booking to agreement registration by over 60%.

b. Improving transparency in construction progress: We hosted more than 13000+ customers across our projects to come and view the progress of construction at the site either physically or virtually

c. Focussing on Handover Experience and Living Experience: The birth of Godrej Living Pvt. Ltd. moved us a step closer to delivering joy during handover and post-possession. Jointly with Godrej Living, we developed two indices: The handover index and Liveability Index. Both indices scientifically deconstruct and quantify the customers experiences at these critical moments and help both teams work synergistically on delivering a top-notch living experience after possession.

d. While clearly focusing on improving customer experience and advocacy, we also ensured timely cash flow from customers and thus improving our overall collection in FY2022-23 by 40% compared to FY2021-22. This is a testimony of our achieving scale and agility through robust processes.

• #AlwaysWithYou

Every year, we celebrate the first week of October as the Customer Service Week where we curate events and activities that help customers find new friends who share a common passion or a hobby including painting, music, dance, etc. Additionally, we celebrate Customer Service Week by organizing Masterclasses from subject matter experts who address topics that are common among a large number of our customers. These topics include - home interior design, home loans, sustainability, etc.

For our residents, our focus is to create moments and events where they can socialize together and have a truly enjoyable community living experience. In FY2022-23, we organized over 50+ events including celebrations around Diwali, Christmas, New Years and Holi.

F. Global Recognition for Sustainability Initiatives

GPL was ranked #1 globally for the third consecutive year amongst residential developers by GRESB (Global Real Estate Sustainability Benchmark) - an industry- driven organization which assesses Environmental, Social and Governance (ESG) performance of real estate assets globally. GRESB is committed to rigorous and independent evaluation of the sustainability performance of real assets across the globe. GRESB data is used by more than 170 institutional and financial investors, listed property companies and fund managers and is backed by all leading international real estate associations and industry bodies. It provides investors the tools to bench mark their investments against each other based on property type, country and regional peer groups. GRESB is widely recognized as the global standard for portfolio-level ESG reporting and benchmarking in the real asset sector. The portfolios of more than 1,500 real estate companies, REITs, funds and developers - and more than 700 infrastructure funds and asset operators - participate in GRESB Assessments. This broad market coverage provides investors with ESG data and benchmarks for more than $6.4 trillion worth of assets under management.

G. Health and Safety Management System

Safety is of paramount importance in GPL and one of the important and critical function for our ambitious business growth aspirations. We are committed to the health and safety of our employees and all stakeholders as per management commitment endorsed in GPL Health & Safety Policy. GPL has a robust health and safety management system certified for ISO 45001: 2018 (International Standard) to ensure a strong safety culture in which safety is the responsibility of each and every employee. GPL Safety Management System is based on proactive process PDCA cycle with leadership commitment, consultation, and participation at all the levels and functions to achieve "Score Zero" aspiration. We have pre-defined safety processes/SOPs including comprehensive safety checks/ inspections at every level beginning with the contractor pre-qualification stage. A dedicated safety team is available at each location, responsible for promoting safety among all employees and implements different awareness and training programs as per monthly safety activity plan. Our Health and Safety Management system is also assessed through certifying agency as a part of surveillance audit.

Visible Safety Leadership

The GPL Health & Safety Policy is an integral part of the GPL safety management system which demonstrates top management commitment towards the implementation and monitoring of the GPL Health & Safety management system. The commitment includes the provision of a safe workplace, compliance with OH&S legislative requirements, stakeholder input and participation, and a process of continual improvement.

With an objective "OH&S As A Business Imperative Enabling Operational Excellence" there was an engagement with Top Management to further strengthen Occupational Health & Safety at GPL through commitment & actions of leaders, by demonstrating visible safety leadership.

Three levels of Management Review Meetings (MRM) is formulated to assess overall Organizational performance in order to further demonstrate visible safety leadership at GPL and enhance positive safety culture. MRM Level 1 is held at HO and is chaired by the COO, Level 2 is held at Region and is chaired by the Operations Head, and Level 3 is held at Projects and is chaired by the Project Manager. We have also established a "Safety Involvement Index" mechanism for the active participation of Operation Heads in various occupational health and safety initiatives at site.

Contract Health and Safety Management System

This proactive system begins well before contract awarding with a safety evaluation of prospective contractors through the pre-qualification (PQ) procedure, an assessment of business risk, and the development of the appropriate mitigation plan based on the contractors PQ score. Additionally, during the pre-qualification stage, we prefer contractors that are ISO 45001 certified. The contractor is briefed during a joint safety kick-off meeting, and the subsequent mobilization phase is guided and audited by a safety and health infra tracker. While implementing the site health and safety plan, the contractor signs a formal undertaking. This also contains SOPs, work instructions, and guidelines for contractors to follow while executing work on the site.

Hazard Identification and Risk Assessment (HIRA)

One of the important elements of GPL Safety System is to assess the risk as per approved risk matrix before start of any activity. A cross-functional Hazard Identification and Risk Assessment (HIRA) team is constituted at each site to identify the hazard and assess the risk associated with the activity and develop control measures as per hierarchy of control. While the primary responsibility of this team is to perform a thorough HIRA exercise, it also provides workers with training related to Hazards/Risks and control measures. The implementation of these controls at site is ensured through Permit to Work.

Training and Awareness Campaign

We believe that the most important pillars of our safety and health management system are skill development, competence building, and awareness. As a result, we primarily focus on awareness campaigns, skill training sessions, motivational campaigns, and health camps. We performed over 24646 safety training sessions with over 438206 participants in the current reporting year. All essential stakeholders received the necessary training and awareness programs in preparation for the implementation of ISO 45001:2018.

We formalized process of training need identification and training calendar for safety trainings at site and effectively executed multiple training programs across all project sites to create and build strong safety culture. National Safety Day, World Environment Day, Road Safety Week, and Fire Service Day are also celebrated at our sites that they serve as vital platforms for creating awareness about health and safety. Safety Communications is an essential element in our Safety Management System for promoting safety awareness and fostering a strong safety culture across GPL.

GPL has also conducted Safety Assessment exercise to assess the level of safety awareness for Execution team.

One of the important initiatives for promoting awareness among project teams, improving safety culture, and reinforcing current operational controls is the safety campaign. Safety Campaigns on Usage of Cell Phone at Construction Site, Rope Suspended Platform, Fire Prevention and Control, Safety in Store Management are designed and conducted at GPL projects. "Horizontal deployment of learnings" supports in the development of a positive safety culture as a continual improvement across GPL to avoid recurrence of any unfortunate incidents.

Safety Audit

Safety audit is a periodic review of the entire occupational health and safety management system, including the policy and programs aimed to prevent workplace accidents/ incidents. We have robust process of safety audit in-line with ISO 45001 requirements on a quarterly basis by qualified internal safety auditors. GPL audit processes are performed and monitored effectively through online safety audit portal. The analysis of safety audit helps us to identify the gaps for further improving the health and safety management system.

External Recognition

Achieving third-party recognition and accolades on health and safety system endorse the organizations reputation, brand value and safety system implementation. GPL has rewarded more than 75 external recognitions/ accolades in the reporting year including international and national safety awards i.e. RoSPA (Royal Society for the Prevention of Accidents), British Safety Council International Safety Award, Grow Care India Safety Award, Apex India Foundation Safety Award, National Safety Council, CREDAI, 19^th Annual Greentech Safety Award and 12^th CIDC Vishwakarma Awards. These recognitions validate a well-established and effective health and safety management system.

Health Surveillance Program

A pre-employment medical examination is performed as part of our Health Surveillance Programme for workers employed at our project locations. Personnel who handle machines or drive vehicles will undergo thorough comprehensive medical examination both at the time of joining and at regular intervals.

H. Human Capital

At GPL, we have seen fast paced business growth over the last year, and are geared towards a continued momentum of quantum growth. In line with this, our employee base has grown 20% in the last 1 year, from 1900 employees to 2400 employees.

We believe our team of Godrejites are the backbone of this achievement and our ambition for the future. At GPL, we take pride in fostering an inspiring workplace with an agile and high performance culture to attract, develop and retain the best talent.

As part of the 126-year-old Godrej Group, we are fortunate to have a proud legacy built on the strong values of trust, integrity and respect for others. At the same time, our exciting and ambitious growth plans allow us to offer unparalleled career opportunities relatively early on in a persons career.

People Philosophy

Our philosophy stands tall and proud on three principles:

• Your Canvas:"Our organization is growing and we want you to grow with us." We have an internal talent marketplace and encourage our people to apply for aspirational roles. With our empowering culture, our people get a chance to lead early on.

• Tough Love:"Go ahead and challenge yourself! Weve got your back." We believe the race for the future is not for the faint-hearted. We expect a lot from our people and differentiate basis performance and potential through career opportunities and rewards.

• Whole self: "We are selfish about your happiness." Simply because happier people make for a more fun culture at Godrej.

BUILDING TALENT FROM WITHIN

We are deeply focussed on building talent from within and actively developing the next line of leaders. We believe in taking early bets on performance and potential, and not just seniority and tenure. In the last 2 years, 6 of 7 Management Committee positions that opened up have been filled internally.

Diversity

At GPL, we deeply value the diversity of our people, their perspectives and experiences. We are keenly focussed on making concerted efforts to diversify representation in our employee mix across levels. This year, we made great strides in pioneering LGBTQ+ hiring for the sector.

LGBTQ+

We are focussed on building for and from the community. We have reached a count of 61+ LGBTQ+ employees across levels (33 full time employees).

We run a dedicated 9-month internship program to build talent on-the-job for members of the community called the PRIDE Internship, currently with 20 active PRIDE interns who are part of this program.

Our endeavour is also to ensure we set them up for success by creating an ecosystem where they can thrive. To this end, we started our journey with a gender-neutral antiharassment policy, same-sex partner benefits, gender neutral adoption benefits, gender transition support and gender neutral washrooms.

We then scaled up by launching an Employee Resource Group called ‘Queers and Allies, sensitization efforts covering 1500 employees in English and vernacular medium, inclusion of gender neutral washroom design as part of site office guidelines, and launching an all-inclusive model site at Pune.

Inclusivity is a central tenet of ourcultureand organizational value system. We look forward to continuing our efforts to ensure GPL remains a truly inspiring and inclusive workplace.

Gender Diversity at GPL

Women currently comprise a sector-best 27.44% of our total workforce with a target to reach 35% by FY25. We are proud of our women leaders who have been instrumental in GPL reaching its current position of strength, with 3 Women in the GPL Management Committee and 6 Women P&L Leaders. This year, we also appointed our first woman Zonal CEO in the North Zone.

We are fully committed to sustain our efforts to recruit, retain, and grow our women leaders. We actively track to ensure that our women talent is equally likely to receive top ratings and promotions and growth opportunities at GPL.

To further enhance representation of Women in Real Estate and Women in Operations within the sector, we have this as a focus area in our Graduate Campus Program. This year more than 70% of our entry level campus hires were women, and more than 30% were women in Operations.

We strive to ensure women friendly policies, facilities, and development opportunities to nurture talent and create an enabling work environment while also ensuring equal opportunities at every step of the way.

a. Our Welcome Back policy is a platform for our alumnae to join us back.

b. ACCEL, our group-wide mentorship program, helps develop women in leadership positions. As a part of the program, high potential women are handpicked and put through a customized program designed to provide an immersive learning experience on strategic thinking, emotional intelligence, influencing and people management through a mix of classroom sessions, on-the-job projects, coaching, and senior leadership interactions.

c. Other forms of support such as late night cab facilities as a safe travel option, creche facilities, adoption benefits, caregiver travel policy for work related travel

Agile, Decentralized Operating Model

Over the last three years, we have brought in a deep focus on agility in our operating model. We have built our operations to be largely site-led, with 70% of our employees based at site. We have supported this by increasingly decentralizing decision making at the last mile. To this end, we have launched detailed RAPIDs this year, empowering the zonal and site leadership on >50% decisions.

Campus

Every year we hire graduates and interns from premier B-Schools as part of our Gallop (BLP) and Gurukul program, giving them an opportunity to work on early impact projects.

In the last one year, we have doubled our intake from B-School campuses with an expansion in our partner campus pool to ISB (For P&L Roles), 11M Indore, IIM Lucknow.

We have also rebooted our Graduate Campus Program this year, with an estimated 250 hires from across Sales, Operations, Customer Centricity, Legal, Finance. We have also ventured into premier graduate campuses such as NTs, NITs, Lady Shri Ram College, Hansraj College, Miranda House, St Xaviers Kolkata, NLSIU Bangalore, NLU Delhi, Christ University.

LEARNING & DEVELOPMENT

At GPL, we have always maintained focus on structured learning as a pillar for building institution and individual capabilities in line with our Godrej Capability Factors.

• Leading Teams For Impact: We believe that the people managers role is of critical importance to build a high - trust, high performance culture. An employee experiences the organisation through their manager. As a result, we lay significant emphasis on the growth and development of people managers. This year 80 people managers underwent a learning journey, with structured pre and post intervention road map enabling them to be effective people managers.

• Acting Strategically: We see this as a critical capability for all our leaders across levels. We are partnered with best in class coaches on running the program around the areas of critical, analytical and systems thinking,

strategy and competitive positioning, and the financial value chain.

• Catalyse: This program is focussed on building capabilities for our high calibre junior talent to take on Project Leadership roles through a 6-month capability building journey on Acting Strategically, Influencing, Leading Teams. 130 of our Assistant Managers underwent this journey in partnership with internal and external learning partners this year.

Learning Academy: So far we have been focussed on learning programs for specific cohorts, we have now shifted focus on building a best-in-class learning academy for the organisation at large by democratizing learning to all. Every GPLite will undergo learning journeys relevant to them.

EMPLOYEE WELL- BEING

COVID Support: The global pandemic has continued to be an evolving situation over this last year as well. GPL has been focused on employees health, safety & well-being. We continued our 24*7 Doctor on call facility, COVID expense support and hospitalization benefits, frequent webinars to build awareness around precautions and structured communication campaigns to keep employees abreast on the recent developments.

Hybrid Work: We also have continued our flexible work policy by continuing a hybrid in-office model post COVID. We believe working remotely can offer several benefits, including the flexibility for people to invest more time in theirwhole selves and improving productivity by allowing them to work in a more focused way. At the same time, there are collaborations and conversations that require in- person interactions for a greater impact.

Mental Health Support: Our Employee Assistance Programme offers a confidential mental wellness support with a panel of expert counsellors who are available 24*7. We are also partnered with Inner Hour, a mental health platform, enabling employees and their families to access self-help tools and confidential mental wellness sessions. We are focussed on helping our employees manage personal and work-based concerns to prepare & equip our employees to respond to sensitive situations at and beyond the workplace.

Unlimited Sick Leave: We continue to be an organisation that extends 100% trust-based sick leave. All ouremployees can avail sick-leave at any time on a need basis.

CULTURE OF RECOGNITION

We believe recognition enhances strategic clarity for our people by signaling the organizational importance of focus areas and behaviours. Our Spot Recognition scheme, Quarterly Regional awards, Annual GPL Legends Awards are some the prestigious platforms where employees who have displayed exemplary performance and behaviours are felicitated and recognized by the senior leaders. GPL Legends is the most aspirational national recognition platform at GPL to celebrate the biggest wins of the previous FY and to celebrate the ‘best of the best of our people.

I. Internal control systems and their adequacy:

GPL has implemented an internal control framework to ensure all assets are safeguarded and protected against loss from unauthorized use or disposition, and transactions are authorized, recorded and reported correctly. The framework includes internal controls over financial reporting, which ensures the integrity of financial statements of the company and reduces the possibility of frauds. The Corporate Audit & Assurance department issues well documented operating procedures and authorities with adequate built-in controls. These are carried out at the beginning of any activity and during the process, to keep track of any major changes. As part of the audits, they also review the design of key processes, from the point of view of adequacy of controls. The internal controls are tested for effectiveness, across all our project sites and functions by the Corporate Audit team, which is reviewed by the management from time to time, for corrective action.

THREATS, RISKS AND CONCERNS

A. Industry Cyclicality

The real estate market is inherently a cyclical market and is affected by macroeconomic conditions, changes in applicable governmental schemes, changes in supply and demand for projects, availability of consumer financing and illiquidity. Your Company has attempted to hedge against the inherent risks through a business model comprising owned projects, joint ventures, residential platforms, and development management through a pan-India presence. However, any future significant downturn in the industry and the overall investment climate may adversely impact business.

B. Statutory Approvals

The real estate sector in India is heavily regulated by the central, state and local governments. Real estate developers are required to comply with a number of laws and regulations, including policies and procedures established and implemented by local authorities in relation to land acquisition, transfer of property, registration and use of land. These laws often vary from state to state. Several of your Companys projects are in preliminary stages of planning and any delay in obtaining approvals could warrant revised scheduling of project timelines.

C. Climate Change- Threats and Challenges for Real Estate Sector

The sector is already experiencing shifts due to climate change, the intensity of which is expected to increase over the coming years. The challenges or risks can be broadly classified into two categories, physical and transitional. The former is on account of acute and chronic physical effects of climate change such as damage to infrastructure at construction sites or building projects, damages to logistics routes, reduced efficiency of workforce due to heatwaves, etc. The latter i.e., transitional risks arise on account of transitioning to a low-carbon economy. Such risks can be broadly classified into four categories namely, reputational, market, technology and policy. A summary of relevant physical and transitional risks material to the firm are listed below¹².

Additionally, climate change also offers some opportunities for the real estate sector to manage these risks and grow in a sustained manner. The most relevant opportunities for GPL are:

• Energy management of real estate assets: The resilience of the real estate sector is guided by the energy management of its various assets, in the long term. With the 2022 energy crisis, and setting up of carbon markets, energy demand mapping will determine economic viability of real estate assets. This can further help facilitate reduction in carbon footprint of the sector, overall. For example, as per Government of Indias provision of the Energy Conservation (Amendment) Bill (2022), usage of non-fossil fuel- based energy is mandated for buildings exceeding 100 kW load consumption.

• Sustainable building materials and efficiency measures:

The use of sustainable building materials can help significantly reduce the carbon intensity of buildings. Energy efficient technology such as sensor operated lighting systems, can further enhance the efficiency of the entire building. This can help in developing organizational and sectoral resilience to transition risks. For example, as per Government of Indias provision of the Energy Conservation (Amendment) Bill (2022), the Energy Conservation Building Code has been redefined as Energy Conservation and Sustainable Building Code. National Building code of India 2016¹³ have also included a new and updated chapter on sustainability.

• Environmental and social stewardship:

Developing strong environmental and social practices in the sector such as Zero Waste to Landfill can help negate negative impactsof the buildings, especially newerconstructions on the local communities and environment. Building symbiotic relationships between real estate assets and existing ecosystems and communities can help in wholistic growth of the sector.

Nature of Risk	Material Risk	Description
	Increasing regulatory and policy pressure	The sector will be impacted by increasing regulation and new policies, such as stricter building standards, carbon pricing, and additional reporting standards.
	Cost of indirect emissions	Activities like construction, refurbishment, and demolition contribute significantly to indirect emissions. Although a real estate company may not have direct control over these emissions, it could exert influence over their magnitude. As carbon-intensive building materials become more costly in the coming years, construction costs will rise.
Transition Risks	Shifting market preferences	As awareness of climate change grows, tenants and potential buyers are beginning to expect more from the real estate sector regarding emissions reductions. The sector faces new risks as preferences shift towards high-efficiency buildings with renewable energy sources.
	Change in investor sentiment	To align portfolios to climate goals, investors could attempt to offset emissions elsewhere in their portfolio to counter high-emitting buildings or favor low-emitting real estate assets.
	Reputation risk	Inaction to decarbonize could result in the real estate sector facing public pressure to reduce its share of emissions.
	Sea level rise and coastal flooding	Sea level rise and coastal flooding will become more frequent and severe, increasing property damage and causing higher repair and maintenance costs.
Physical	Inland flooding	Inland flooding due to the greater frequency and severity of coastal storms or extreme precipitation events can increase property damage. Driven by rapid urbanization, it can also cause the costs of repairing and maintaining properties to rise.
Risks	Extreme storms and wind	Greater severity and frequency of extreme storms, such as hurricanes, can cause damage worth billions of dollars. Extreme storms can negatively impact the value of commercial real estate in the near term.
	Wildfires	Millions of residential and commercial buildings have been built in areas prone to wildfires. With the intensity and severity of such fires increasing, the likelihood of these properties being destroyed by a wildfire rises.
	Subsidence	An increasing number of real estate assets are likely to be at risk of subsidence in the coming years, potentially causing serious structural damage to buildings.
	Heat and water stress	Rising heat will create new cooling needs for buildings, increasing operating costs. Water stress will also lead to higher operating costs due to increased water prices, the need to improve water efficiency, and the regulation of water use.

OUTLOOK

FY2022-23 was a landmark year for the real estate sector and GPL as well wherein we witnessed highest ever sales, collections, project deliveries and business development.

Post-pandemic, developers have moved away from the traditional way of doing business and rightly focused on end-user customer demand with a strong focus on innovation and digital transformation. We believe FY2023- 24 will continue the healthy sales momentum backed by solid structural foundation, sustained demand and relatively affordable albeit somewhat higher housing loan rates. Financially strong and reputed developers with superior execution capabilities stand to benefit disproportionately from the ongoing cyclical upturn.

While commodity cost inflation has been persistent and poses a risk to operating margins, the price hikes taken so far by the real estate players have been well absorbed. Interest rate hikes to contain inflation will increase the cost of capital and hurt the weaker players, favoring the already well-capitalized developers like GPL. GPL posted a robust sales and operational performance and we expect the performance to continue in FY2023-24, given our exciting pipeline, strong balance sheet and execution expertise. We look forward to adding a large number of projects to our portfolio in FY2023-24, which is amongst our top priorities and which will enable us to grow rapidly going ahead.

KEY FINANCIAL RATIOS

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.

				Amount in Crores
Ratios	2023	2022	Definition	Explanations
Trade Receivables Turnover	5.13	5.31	Trade Receivables Turnover = Revenue from Operations/ Average Trade Receivables	Decrease in Trade Receivable Turnover Ratio is mainly on account of increase in trade receivables during current year on recognition of revenue for certain projects as compared to previous year
Inventory Turnover	0.21	0.29	Inventory Turnover = Sale from Real Estate Developments/Average Inventory	Decrease in Inventory turnover ratio is majorly on account of increase in inventory due to addition of new projects during current year as compared to previous year
Interest Coverage Ratio	5.70	4.21	Interest Coverage Ratio - Earning before interest, taxes, depreciation and amortisation expenses / Finance Costs	Interest coverage ratio increased mainly on account of increase in adjusted EBITDA due to revenue recognised for certain projects on completion of performance obligation
Current Ratio	1.46	1.88	Current Ratio - Current Assets / Current Liabilities	Current Ratio decreased on account of increase in current liabilities mainly due to increase in a. Advance received against on sale of flats/ units of new projects. b. Increase in trade payables. c. Increase in debt
Net Debt- Equity Ratio	0.39	0.05	Net Debt- Equity Ratio = Net Debt (Non-current liabilities - borrowings (including current maturities of long term debt) plus current financial liabilities - borrowings less cash and bank balances and other current investments / Equity	Net Debt Equity Ratio changed mainly due to utilization of cash and bank balance for business development activity and increase in debt during the year
Operating Profit Margin (Adjusted EBITDA Margin) %	37.3%	31.3%	Earning before interest, taxes, depreciation, amortisation expenses and interest included in cost of sales / Total Income including Share of profit / (loss) of joint ventures and associate (net of tax)	Increase in Adjusted EBITDA Margin is mainly on account of increase in profit due to revenue recognised for certain projects on completion of performance obligation
EBITDA %	33.1%	29.4%	Earning before interest, taxes, depreciation, amortisation expenses and interest included in cost of sales / Total Income including Share of profit / (loss) of joint ventures and associate (net of tax)	Increase in EBITDA Margin is mainly on account of increase in profit due to revenue recognised for certain projects on completion of performance obligation
Net Profit Margin %	19.1%	14.7%	Profit for the year / Total Income including Share of profit / (loss) of joint ventures and associate (net of tax)	Increase in Net Profit Margin is mainly on account of increase in profit due to revenue recognised for certain projects on completion of performance obligation
Return on Net Worth	6.4%	4.1%	Profit / (Loss) for the year / Average Equity	Return on Net Worth is mainly on account of increase in profit due to revenue recognised for certain projects on completion of performance obligation