Modis Navnirman Ltd Management Discussions

WORLD ECONOMY

World growth has held up in 2023, driven by a normalisation of consumption in China and a pick-up in US growth, which have outweighed a sharp slowdown in Europe following the regional energy shock in 2022. However, with the full impact of recent monetary tightening still to be felt, Chinas property slump continuing, and the eurozone stagnating. Central Banks raised interest rates in CY2023 to counter inflationary pressures. Despite challenges such as supply chain disruptions and elevated inflation, major economies received support from fiscal stimulus, monetary policies, trade agreements, international aid, green initiatives, and technological investments.

The International Monetary Fund (IMF) projects moderate and stable growth for CY2024 & CY2025 at 3.2%, albeit lower than the historical average of 3.1%. This expectation reflects sluggish economic activity, primarily attributed to a slowdown in advanced economies. The growth rate of these economies, which stood at 1.6% in CY2023, is anticipated to remain sluggish at 1.7% to 1.8% over the next two years due to policy tightening, financial sector turmoil, high inflation, the ongoing conflict between Israel and Gaza, and the lingering effects of four years of the COVID pandemic.

The global inflation is forecasted to decline from 6.8% in 2023 to 5.9% in 2024 and further to 4.5% in 2025. This steady decline in inflation is attributed to effective monetary policies and easing supply chain disruptions. Future economic trends indicate continued resilience and growth, supported by policy reforms and investments in technology and infrastructure.

The global focus on sustainability and green energy transitions is expected to create new economic opportunities.

INDIAN ECONOMY

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.

The Indian economy demonstrated remarkable growth in FY 2023-24, with 7.6% GDP increase, showing resilience against global challenges, according to second advance estimates of national income, 202324. This growth, driven by rising consumer spending, industrial activity, and supportive government policies, makes India one of the fastest-growing major economies.

The economic outlook remains promising as the Finance Ministry projects India to become a $7 trillion economy by 2030, with an average annual growth rate of 6.5-7.0%, positioning it as the worlds third-largest economy.

The growing middle-income class and rising disposable income are expected to drive demand for luxury products and services, likely to increase overall private consumption in the economy. Further, the implementation of the PLI scheme benefitting 14 sectors, digitalization push, and agricultural reforms are expected to enhance manufacturing activities, financial inclusion, and rural incomes.

REAL-ESTATE SECTOR

Indias residential sector is expected to reach 290,000 to 300,000 units of sales due to robust demand and quality launches. The midsegment price category has dominated sales, while the premium segment has seen a 22% increase. Luxury segment sales have also seen an 83% increase, with developers launching projects to cater to the demand trend. Indias luxury real estate sector is experiencing a

growing demand due to changing consumer preferences and technological advancements. Besides, this overwhelming increase in spacious luxury houses is also attributed to the COVID-19 pandemic because people with high purchasing capacity seek liveable spaces with ample safety and amenity features.

Indias millennials, comprising 36% of the population, accounted for 54% of homebuyers last year, with an estimated combined spending power of over US$330 billion. With rising disposable income, they seek bigger homes and invest in high-end housing units, with luxury housing sales in Indias top seven cities jumping five-fold from 2018 to 2023.

Indias luxury real estate market is experiencing a significant transformation, with an expected CAGR of over 5% in 20232028. The demand for high-end residential properties is increasing due to the allure of opulent living spaces, cutting-edge amenities, and prime locations. Non-Resident Indians (NRIs) are increasingly investing in Indias luxury real estate, injecting $13.1 billion into the market in the previous year. By 2025, NRIs are expected to account for 20% of the countrys total real estate investments.

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Real estate developers in India are also offering upscale amenities that cater to the refined global lifestyle of NRIs, such as state- of-the-art security systems, smart home technologies, wellness centres, and premium concierge services. This collaboration between top-tier developers and NRIs highlights the increasing sophistication and international appeal of luxury real estate in India.

MUMBAI REAL-ESTATE SECTOR

In CY2023, the Mumbai real estate market experienced robust growth despite global challenges, retaining its position as the top market with 86,871 units sold, marking the highest sales in eleven years.

This surge stemmed from a positive economic outlook, increased disposable income among

buyers, a shift towards larger homes, and a fear of missing out on opportunities in the flourishing market amidst rising prices.

Sales surged during festive seasons like Navratri, Dussehra, and Diwali, which traditionally witness heightened real estate activities due to positive sentiments and developer strategies of introducing new projects with attractive payment plans.

The momentum in new project launches remained strong, with Mumbai witnessing 93,051 new units introduced in CY2023, the highest since CY2014. The residential market in Mumbai is poised for continued growth, driven by strong consumer demand fueled by ongoing infrastructural developments, rising affluence, and evolving consumer preferences.

BUDGET 2024 - TAKEAWAYS

This years union budget was supportive to fostering long term growth in Indias real estate sector, emphasizing urban infrastructure development and the digital economy.

The Governments heightened emphasis on infrastructure capital expenditure sets a f favourable backdrop for real estate opportunities.

Key measures in this regard include:

Inclusive Development

Despite COVID-19 challenges, PMAY (Rural) is close to its three crore houses target, with plans for two crores more houses in five years. The PMAY scheme for affordable housing includes PMAY (Urban) and PMAY (Rural), with a total allocation of ^80,671 crore, of which ^54,500 crore is for PMAY (Rural). PM-SVANidhi successfully supported 78 lakh street vendors with credit. The government aims for holistic development, envisioning Viksit Bharat by 2047.

Affordable housing

The segment of affordable housing remains a pivotal area for developers and a primary

focus for the government. As per the new Union budget, a housing for Middle Class scheme is to be launched to encourage the middle class to buy their own houses. The Pradhan Mantri Awas Yojana (PMAY) is close to achieving 3 crore houses, additional 2 crore houses are targeted for the next 5 years, as discussed above. This shows that the affordable housing market is projected to experience a surge in demand, bolstered by an anticipated economic revival and increasing income levels.

Development of cities as growth hubs

Working with states, the government will also facilitate the development of cities as "Growth hubs". This will include orderly development of peri-urban areas using townplanning schemes and transit planning. The rise of growth hubs might benefit real estate developers by providing a framework for urban development, which they can leverage to launch new offerings to attract potential buyers and investors.

OPPORTUNITES AND CHALLENGES

Opportunities

Housing Demand ^ ^ )

A combination of economic growth, increasing income levels, and the perception that housing prices are stabilizing has led to a notable uptick in the demand for homes.

This trend is evident as potential buyers, previously on the sidelines, are now entering the market as first-time homeowners or existing homeowners looking for larger spaces. The shift towards remote and hybrid works models is further influencing the desire for more spacious living arrangements.

Employees offering flexible work options continue to be a significant factor in this trend, as it allows employees the freedom to live further from the office, thereby boosting demand for in various segments.

Digital Real Estate Sales

Digital marketing has become a key strategy for real estatedevelopers to boost sales and

connect with customers. Since the pandemic, their marketing efforts have expanded beyond attracting new customers and building brand awareness to include creating personal connections digitally. Thanks to technology that allows property purchases online, developers have seen strong sales, even during lockdown periods. Theyre using digital tools to engage with potential buyers, present project details, offer virtual tours, and target Non-Resident Indians (NRIs) to increase sales. Advanced technologies like virtual reality, augmented reality, and AI- driven chatbots are increasingly employed to offer tailored services to potential clients. Moving forward, developers will need to keep up with technological advancements, as the share of real estate transactions conducted online is expected to grow.

Challenges & Threats

Regulatory Hurdles

The real estate industry is subject to extensive regulation, and any negative adjustments in governmental policies or the regulatory framework can negatively influence the sectors performance. Significant delays in procedures related to acquiring land, determining land use, initiating projects, and obtaining construction approvals are common. Changes in policy applied retrospectively, along with regulatory obstacles, could affect profitability and diminish the appeal of both the sector and the companies active within it.

Pricing

One of the major challenges is the high property prices. Mumbai consistently ranks among the most expensive cities in the world when it comes to real estate.

The soaring property prices make it difficult for first-time homebuyers to enter the market and pose a challenge for investors looking for affordable investment options

INTERNAL CONTROL SYSTEM

The Company has also focused on upgrading the IT infrastructure - both in items of hardware and software. In addition, the company is presently reviewing the process documentation to ensure effectiveness of the controls in all the critical functional areas of the Company.

Post pandemic, developers have moved away from the traditional way of doing business and rightly focused on end-user customer. We believe that 2024-25 will be a growth year too with constant stability and higher sales as compared to last year.

The demand for residential property will still increase as hybrid cultures have been accepted by corporates.

We look forward to adding a large number of

HUMAN RESOURCES

Your Company is always committed to the health and safety of its employees. Your Company provides a clean and hygienic and conducive work environment to all employees. Mental wellness is a positive state

of mental health. It ensures that individuals think, feel and act in ways that will create positive impact on their personal and professional life. Your company aims at optimizing mental health. Your Company aims at gender diversity. Women are given equal opportunities.

OUTLOOK

Ongoing infrastructural advancements, stable mortgage rates, and clear monetary and regulatory measures create a conducive environment for sustained growth in Indias residential real estate sector. Poised for a multi-year bull run, demand is expected to remain strong in 2024.

MNLs solid financial standing, coupled with its reputation for exemplary execution, positions it favorably to capitalize on the prevailing cyclical upturn. We anticipate continued strong sales and operational performance in FY2024-25, driven by our promising project pipeline, robust balance sheet, and proven expertise in execution

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. Since the company was incorporated on March 4^th, 2022 a comparison chart cannot be provided.