Housing & Urban Development Corporation Ltd Management Discussions

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

Economic growth remained resilient despite Indian economy facing several external headwinds in 2025- 26. Real gross domestic product (GDP) is estimated to grow by 7.6% (y-o-y) during the year, as per the Second Advance Estimates

(SAE) of the new GDP series (base year 2022-23). Private consumption and fixed investment contributed significantly to overall growth, while net external demand remained soft. The global economic backdrop during Financial Year 2025-

26 was mostly dominated by tariff issues emanating from US and geopolitical tensions. The Government has tried to mitigate the negative impacts of these developments through a mix of fiscal and monetary stimulus. The 56^th meeting of the Goods and Services Tax (GST) Council signified a major event in Indias indirect tax journey. It marked a major push towards simplification and rationalization of the Indias existing GST tax structure intended to give a boost to the overall consumption demand for spurring economic growth. On the monetary policy front, during the 2025-26 fiscal year, the Reserve Bank of India (RBI) embarked on a phased of monetary easing, reducing the repo rate by cumulative 100 basis points across multiple Monetary Policy Committee (MPC) meetings to support economic growth amid softening inflation. The repo rate was reduced by 25 basis points (bps) to 6.00% in April 2025, 50 basis points to 5.50% in June

2025 and 25 basis points in December 2025 to 5.25%. In the subsequent three MPC meetings RBI held the key policy repo rates steady at 5.25%. The current policy stance of RBI remains ‘neutral in its June 2026 MPC, implying that future rate trajectory remains uncertain and will depend on the evolving global and domestic macroeconomic conditions.

Government is ushering in a new paradigm for urban development. A series of policy measures and initiatives were announced in the Union Budget 2026-27 focusing on Tier-II & Tier-III cities. The budget focused on infrastructure-led urban growth with a highest ever capex outlay of Rs.12.2 Lakh Crore. Recognizing that Cities are Indias engines of growth, innovation, and opportunities, the budget focused on Tier II and Tier III cities, and even temple-towns, which need modern infrastructure and basic amenities the budget announced several measures to address the requirement. The Budget aimed to amplify the potential of cities to deliver the economic power of agglomerations by mapping City

Economic Regions (CER), based on their specific growth drivers. An allocation of Rs.5,000 Crore per CER over 5 years has been proposed for implementing their plans through a challenge mode with a reform-cum-results based financing mechanism. The budget also proposed to incentivize the ULBs for issuance of municipal bonds, proposed to launch a scheme to support States in establishing five Regional Medical Hubs & proposed to develop 15 archaeological sites.

2. STRENGTHS AND WEAKNESSES

HUDCO is a premier techno-financing Navratna Central Public Sector Enterprise and an NBFC-IFC in the new RBI regulatory framework, a strategic player in the housing and infrastructure development across the country. The Company has a 56-year standing in financing housing and urban development sector with established brand image that has grown incrementally over the years. The Company has a multi-sectoral focus in its operations and has been funding a wide array of housing and urban infrastructure projects throughout the length and breadth of the country. In the process, the Company has established a well-developed network of borrowers in the domain of various state government agencies and its parastatals such as Development Authorities, Housing Boards, Urban Local Bodies, Water Supply Sewerage Boards, Roads & Bridges Development Corporations. HUDCO is also a strategic partner in implementing the Governments action plan schemes like PMAY 2.0, Smart City, AMRUT, Swachh Bharat, Jal Jeevan Mission, etc. It is a consistently profit-making company with pristine asset quality and impressive credit ratings.

The Company has a pan-India presence with 20 Regional and 11 Development Offices implying a significant outreach across the country. HUDCO has a human resource base of multidisciplinary professionals from various fields covering

Finance, Law, Architecture, Civil Engineering, Urban and Regional Planning, Information Technology, Economics, Human Resources and Public Relations, social science, etc. The Human resource base has been expanded in last two years with induction of more than 140 executives at various levels in tune with the enhanced business needs of the company. HUDCO has its own Training & Research Institute, the Human Settlement Management Institute (HSMI), for research activities as well as training & capacity building of inhouse and outside professionals of the habitat sector.

Few key challenges faced by HUDCO in the present scenario are inadequate access to low cost source of funds due to current geopolitical situation leading to forex fluctuations; exposure limits for funding to individual/group companies as per RBI master directive; sovereign government guarantee/budgetary support not available to the most states on account of exhausting the FRBM limits; rising tendency of the government borrowers to invite bids for best interest rate offers leading to increased competition from banks and other FIs like NABARD/NABFID etc.

3. OPPORTUNITIES, THREATS, RISKS AND CONCERNS

With the aim of ‘Viksit Bharat by 2047 Government has unveiled its plan in Union Budget 2026-27 focusing on Tier-II & Tier-III cities with a plethora of initiatives like City Economic Regions (CER), incentives for issuance of municipal bonds, proposal for developing archaeological sites, temple towns and medical hubs. Recently, Government has launched the operational guidelines for the Rs.1 Lakh Crore Urban Challenge Fund (UCF) and a Rs.5,000 Crore Credit Repayment Guarantee Sub-Scheme (CRGSS) in April 2026. Urban Challenge Fund (UCF) is a new Centrally Sponsored Scheme of Ministry of Housing & Urban Affairs (MoHUA) with Rs.1,00,000 Crore Central Assistance (Financial Year 2025-26 to Financial Year 2030-31) to support transformative and bankable urban infrastructure projects through competitive "challenge-mode". Under the scheme, Central Assistance will be up to 25% of project cost, while at least 50% of funding will be mobilised through municipal bonds, bank loans and public-private partnerships, thereby ensuring financial discipline and encouraging private participation. This will lead to a total investment of Rs.4 Lakh Crore in urban sector in next five years, marking a paradigm shift in Indias urban development approach from grant-based financing to market-linked, reform-driven and outcome-oriented infrastructure creation. This will open up a new avenue for HUDCOs business growth.

HUDCO, under the guidance of the MoHUA, has launched a new initiative, Urban Invest Window or "UiWIN" as One-stop End-to-End Support Platform for ULBs in Developing Bankable Infrastructure Projects. The key objective of UiWIN is to provide end-to-end handholding support to the ULBs from project identification and structuring to financial mobilization and implementation for comprehensive ringfenced area-based development of clusters/cities. HUDCOs UiWIN initiative can immensely benefit from the Governments UCF and CER programmes in terms of funding and fee-based activities. HUDCO will repurpose its pan India network of 20 Regional Offices, to act as State Urban Invest Window(s). Further,

HUDCO has also opened a dedicated window for private sector projects focusing on sectors like real estate, roads and highways, energy transition, seaports and airports etc. to support Governments efforts in bridging the funding gap in critical infrastructure sectors by different financing models. Under this HUDCO may also explore funding private sector borrowers for the projects being developed in PPP mode. HUDCO also envisions a strong focus on supporting climate-resilient and sustainable infrastructure including clean energy development across the country ensuring an orderly urban development.

4. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

During the year under review, HUDCO operates only in one segment and has no other reportable segment, hence, segment wise performance, has not been given.

5. OUTLOOK

Indias vision of Viksit Bharat @2047 is expected to drive sustained investment flow into housing, urban development, and infrastructure over the coming decades. The urban sector in India contributes around 60% of the GDP to the Indias economy. Rapid urbanization is transforming the country, with the urban population projected to exceed 50% by 2050, resulting in almost one in every two Indians living in urban areas. As cities expand and new economic centres emerge, especially in Tier-II and Tier-III cities, there will be a significant need for better housing, transportation networks, water and sanitation systems, healthcare facilities, energy infrastructure, and other urban services. The scale of investment required is substantial. According to World Bank estimates, India will need nearly USD 840 billion in urban infrastructure investments between 2021 and 2036, while demand for urban housing is expected to more than double by 2070. This presents a long-term growth opportunity for institutions involved in financing urban and infrastructure development and therefore augur well for HUDCO.

As urbanization is gaining momentum, the Government has now decided to focus on the Tier-II and Tier III cities as these are going to be new growth centres. The union budget pronouncements like highest ever capex outlay of Rs.12.2 Lakh Crore, City Economic Region (CER), incentives for the ULBs for issuance of municipal bonds and subsequent launch of Urban Challenge Fund (UCF) are going to provide significant tailwind for the growth of the urban sector. These measures mark a distinct shift in Indias urban development approach from grant-based financing to market-linked, reform-driven and outcome oriented infrastructure creation and designed to catalyse huge investment flows into the urban sector. HUDCO as premier financing institution in the urban sector is going to be a major beneficiary of these policy developments.

While global uncertainties, geopolitical tensions, inflationary pressures, and volatility in financial markets may pose short-term challenges, Indias long-term growth fundamentals remain strong. The continued focus on infrastructure-led development, urbanization, energy transition, and climate-resilient growth is expected to generate significant demand for long-term financing. In this evolving landscape, HUDCO is well positioned to play a vital role in Indias urban development. With its long-standing expertise in housing and urban infrastructure finance, strong relationships with government agencies and urban local bodies, and expanding presence across sectors such as renewable energy, transportation, logistics, ports, airports, and social infrastructure, HUDCO is strategically aligned with the countrys development priorities. Through initiatives such as UiWIN and its diversified financing approach, the Company aims to support Indias urban transformation while creating sustainable growth opportunities for its stakeholders. As India progresses towards the vision of Viksit Bharat @2047, HUDCO is expected to remain an important partner in financing the nations infrastructure and urban development journey.

6. INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

HUDCOs internal control system with reference to the Financial Statements is adequate and commensurate with the nature, size, and complexity of its operations. The detail with respect to internal control systems has been given in the

Directors Report.

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The details of Financial Performance with respect to Operational Performance has been fully explained in the Directors Report. In preparation of Financial Statements, the Company has followed Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standard), Rules, 2015 (as amended) with effect from 1st April, 2018 issued by the Ministry of Corporate Affairs. Information pursuance to Schedule-V of SEBI (LODR) Regulations 2015 - (i) There is no significant changes (change of 25% or more as compared to the immediately Previous Financial Year) in key financial ratios viz. Debtors Turnover Ratio (Not applicable to HUDCO, being a NBFC-IFC), Inventory Turnover

Ratio (Not applicable to HUDCO, being a NBFC-IFC), Interest Coverage Ratio (Not applicable to HUDCO, being a NBFC-IFC), Current Ratio (Not applicable to HUDCO, being a NBFC-IFC and due to maintenance of Accounts as per

IndAS), Debt Equity Ratio and Net Profit Margin during the Financial Year 2025-26 as compared to the Previous Year

2024-25. Return on Net Worth is 20.20% during the Financial Year 2025–26 as compared to 15.67% in Previous Year 2024-25. The increase in Return on Net Worth in Financial Year 2025–26 is exceptional due to raising of Perpetual Debt of Rs.1442 Crore and reversal of Deferred Tax Liability on Special Reserve of Rs.1800 Crore. However, the Operating Margin stood at 24.50% as on 31.03.2026 as compared to 35.27% on 31.03.2025 i.e. decrease by 30.54%.

The decline in operating margin is mainly due to forex fluctuations driven by global geopolitical conditions, coupled with the rationalisation of lending rates to maintain competitiveness among peers. However, the Company stands firmly on its motto of profitability with social justice thereby facilitating creation of sustainable and resilient infrastructure.

8. MA TERIAL DEVELOPMENT IN HUMAN RESOURCES, INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

Learning and Development (L&D) remains central to HUDCOs strategy for building a future-ready workforce, particularly amid the Companys expanding presence across diversified business verticals. Continuous education and structured training programs are essential to ensure compliance with standard operating procedures while minimizing human errors. In alignment with this objective, a total of 61 in-person training programmes and workshops were conducted during

Financial Y 2025 26, covering employees across all geographies and focusing on domain-specific, behavioural, ear compliance, and skill enhancement areas.

Keeping in view, the Prime Ministers vision of creating "Karmayogis" - dedicated public servants who modernize their thinking, enhance their skills, and contribute to national development towards Viksit Bharat by 2047 - 382 unique employees successfully completed training modules on the iGOT platform. These modules covered diverse areas such as digital transformation, communication, governance, cyber security, public policy, leadership, procurement, ethics, RTI, and stress management, thereby strengthening professional capabilities and supporting continuous capacity building. In addition, the organization achieved 81.75% employee coverage under the One-Day Rashtriya Karmayogi

Jan Seva Program.

Considering the upcoming superannuations and the existing shortage of experienced professionals at middle and senior levels, the Company proactively launched a major recruitment drive during the year. This initiative successfully onboarded fresh talent at lateral entry levels, while Trainee Officers are scheduled to join shortly, thereby strengthening the talent pipeline and supporting long-term organisational growth.

As on 31^st March, 2026, HUDCO has a workforce of 585 employees. The category wise details of employees are as under:

Group	General	SC	ST	OBC	EWS	Ex. Serv.	Total	Physically Handicapped*
A	291	82	36	97	4	0	510	6
B	4	1	0	0	0	0	5	0
C	6	3	5	3	0	0	17	0
D	22	15	9	7	0	0	53	1
Total	323	101	50	107	4	0	585	7

* Physically Handicapped categorization is included in their respective categories

HUDCO follows the reservation guidelines/ policy of the Government of India in matters relating to recruitment and promotion, as applicable

9. ENVIRONMENTAL PROTECTION AND CONSERVATION, TECHNOLOGICAL CONSERVATION, RENEWABLE ENERGY DEVELOPMENT, FOREIGN EXCHANGE CONSERVATION

Your Company is not engaged in any manufacturing activity, hence, there are no significant particulars, relating to environmental protection and conservation, technological conservation, renewable energy developments, etc. HUDCO encourages projects which are environmentally safe and secure and have taken various initiatives in the direction on a continuous basis. The particulars with regard to foreign exchange earnings and outgo are given in the Directors Report.

Focus on ESG and Social Impact - Recognizing the growing importance of sustainability in infrastructure financing, HUDCO has formulated a dedicated Environmental, Social, and Governance (ESG) Policy. The organization continues to prioritize funding for projects that align with ESG norms and generate positive social and environmental impact. Recent examples include financing for electric vehicle (EV) charging infrastructure, implementation of solarisation projects, and other green urban initiatives.

HUDCOs continuous focus on responsible lending, financial innovation, and inclusive urban development positions it as a key enabler in Indias journey toward sustainable and resilient cities.

10. CORPORATE SOCIAL RESPONSIBILITY

The status report on Corporate Social Responsibility for the year 2025-26 has been given in the Directors Report and Annual Report on CSR activities, annexed with the Directors Report.

11. CAUTIONARY STATEMENT

All the statements in the management discussion and analysis report with regard to projections, estimates and expectations are forward looking statement, based on certain future assumptions and expectations, which could vary from the actuals envisaged. The Company assumes no responsibility in any way to modify or revise such statements based on subsequent events or developments.

	For and on behalf of the Board of Directors
	Sd/-
	Sanjay Kulshrestha
Place : New Delhi	Chairman & Managing Director
Date : 28th July, 2026	(DIN: 06428038)