Prime Property Development Corporation Ltd Management Discussions

In CY24, despite the concerns around weak economic growth and inflationary pressures, the global economy has held steady, although the grip varies across geographies and countries.

According to the International Monetary Fund, the global economy grew at 3.2% in CY24 and is expected to continue the growth momentum with growth projected at 3.3% in CY25 as well as CY26. However, that is still below the long-term average of 3.7% achieved in the first two decades of this millennium. Dark clouds of tariff tensions, primarily originating from the USA, are currently casting a shadow over the global economic landscape, creating uncertainty and potential headwinds for growth and stability. Tariffs imposed by the USA on all their trading partners coupled with counter-tariffs levied by China as well as few other countries on the USA has muddied the global growth forecasts. Failure to resolve these trade disputes swiftly could significantly impede global growth through dislocations in global trade.

Led by Covid period pump-priming of the economies in various countries, inflation had been a persistent challenge throughout CY22 and CY23. In CY24, the inflation descended from its mid CY22 peak, largely due to the efforts of the central banks. Average global headline inflation fell from 6.8% in CY23 to 5.9% in CY24. It is further projected to decline to 4.2% in CY25 and 3.5% in CY26 as per IMF estimates. While on a global level, disinflation continues, there are signs of elevated inflation in a few countries. In countries where inflation remains persistently high, central banks are moving more cautiously in the easing cycle while keeping a close eye on economic activity, labour market indicators and exchange rate movements. Tariff related distortions could also raise the fear of stagflation given the impact on growth and also drive up the cost of manufactured goods.

Equities in most major economies in CY25 thus far have largely mirrored the direction of trade policies emanating from the United States, particularly after the US presidential election. This policy led uncertainty in the markets is going to have an impact on the global capital flows and currencies. In general, equity valuations have become more subdued and a broad-based strengthening of the US dollar, driven primarily by expectations of higher tariffs and higher interest rates in the United States, has kept financial conditions tighter.

The geopolitical landscape in CY24 remained volatile. The wars in Ukraine and in the Middle East continued to have significant impacts on global energy markets, food prices and supply chains. Brent Crude oil prices averaged US$85 per barrel in CY24, compared to US$82 in CY23, according to the International Energy Agency. Additionally, tensions between major economies like the US, China and Russia continue to influence global trade and economic stability. Energy prices in the

near future are going to remain volatile as economies grapple with tariff related uncertainties and prolonged wars in Middle East and Europe.

Indian Economy:

The Indian economy continues to strengthen despite the global headwinds. As per the First Advance Estimates (FAE) released by the National Statistical Office (NSO), real Gross Domestic Product (GDP) is expected to grow by 7.3%, in FY2023-24, underpinned by strong investment activity. For FY2024-25, growth, while still healthy, may see a moderation to 6.8%-7% as per various estimates due to high interest rates and lower fiscal impulse would temper demand and the net tax impact would normalize. Also, the uneven economic growth of some trading partners and escalation of geopolitical uncertainties can drag down exports.

Support will come from other areas. Household consumption is expected to improve as continued disinflation will prop up the purchasing power of consumers. Secondly, healthy rabi sowing and good kharif output assuming a normal monsoon will support agricultural income. Thirdly, prospects of fixed investment remain bright owing to an upturn in the private capex cycle, improved business sentiments, healthy balance sheets of corporates and banks as well as the governments continued thrust on capital expenditure. A sustained economic growth will lead India to become the 3rd largest and an upper middle-income economy in years to come.

Improving the outlook for global trade and increasing integration in the global supply chain will support net external demand. Headwinds from geopolitical tensions, volatility in international financial markets and geo-economic

fragmentation, however, pose risks to the outlook. The Reserve Bank of India (RBI) has kept the Repo Rate unchanged since February 2023 to manage retail inflation within its target range, which has consistently stayed above the 4% mark. In July 2023, Consumer Price Index (CPI) inflation rose to 7.44%, the highest level seen since September 2022. The CPI has since eased and is hovering around 5%. The RBI anticipates a 4.5% inflation for FY2025. Economists expect the RBI MPC to maintain the repo rate at 6.5%, marking the seventh consecutive unchanged rate. Indian banks, with approximately 70% of assets in floating-rate loans, face less exposure to interest rate risks compared to their global counterparts. This arrangement allows them to benefit from rising rates and reduces potential losses on bond holdings as interest rates climb.

The World Bank expects India to grow by 6.6% in FY2024-25 after an estimated growth of 7.5% in the previous financial year.

Although the short-term outlook appears challenging due to rising interest rates, external supply shocks, and geopolitical tensions, we believe the government is taking appropriate measures to ensure a sustainable growth trajectory for the country. The union budget presented this year strongly supports the long-term growth of Indias real estate sector through its focus on urban infrastructure and the digital economy. The governments significantly expanded capital expenditure target for the year is expected to generate job opportunities and stimulate higher economic activity.

Real Estate Scenario in India:

Despite all the external and internal roadblocks in CY24, including inflation, general elections and geopolitical tensions, India continues to be one of the fastest growing major economies in the world. The Indian real estate sector has shown robust growth since the pandemic. While initial recovery saw a surge in housing sales, commercial leasing has also gained significant traction over the past year. Hospitality sector continues to do exceedingly well with average daily rates at an all-time high. As India moves from being a low-income to a middle- income country, household incomes and spending will continue to rise giving a long runway for growth in the real estate sector. Real estate will continue being a driver of growth and employment and will continue to take larger share of the countrys GDP, as is the case in other more developed and advanced economies.

In India, the real estate sector is the second-highest employment generator, after the agriculture sector. The real estate sector in India is expected to reach US$ 1 trillion in market size by 2030, up from US$ 200 billion in 2021. The emergence of nuclear families, rapid urbanisation and rising household income are likely to remain the key drivers for growth in all spheres of real estate, including residential, commercial and retail. Rapid urbanisation in the country is pushing the growth of real estate.

Business Analysis, Performance & Outlook:-

Mumbais real estate market has once again demonstrated its resilience, closing the financial year FY 2024-25 with substantial stamp duty collections and consistent growth in highvalue transactions. As the financial year concludes, property registrations have recorded a 9.0% year-on-year increase, while stamp duty collections have surged by 22.0% year-on-year in FY 2024-25.

The robust demand for premium homes reflects sustained buyer confidence and economic stability, while the preference for larger apartments signals evolving homebuyer aspirations. The anticipated easing of interest rates in the coming months is likely to further bolster market sentiment.

Opportunities, Risks & Concerns:-

Risks are part of almost every industry and real estate is no exception.

Investing in the Mumbai real estate market can be highly lucrative if done strategically. Mumbais real estate market is constantly evolving, and staying up to date with the latest trends is crucial for anyone looking to invest in this city. One of the prominent trends in recent years is the rise of affordable housing projects.

With the growing demand for budget-friendly homes, developers are now focusing on constructing affordable housing complexes in various parts of the city. This trend not only caters to the needs of the middle-class population but also presents an excellent investment opportunity for those looking to earn rental income.

The management of the Company shall timely capitalize on the market opportunities considering the strengths it possesses.

Segment Performance:

Your Company operates in a single business segment, namely property development; hence, no further disclosure is required under Accounting Standard 108 on segment reporting.

Internal Control Systems & their adequacy:

The Company has a regular system of internal check & control, costing, budgeting, forecasting, monitoring projections & efforts are regularly put in to further strengthen the system.

Material Development in Human Resources:

The Company uses the services of a fairly good team of Engineers, Architects, Contractors, Suppliers and Legal Advisors. The people employed by the Company and other agencies working for the project, are technically qualified/ competent and help in successful and timely execution of projects. The Company has a qualified Company Secretary and Compliance Officer to deal with secretarial work and service to shareholders.

Accounting Treatment:

The Company has duly complied with the prescribed Accounting Standards and have not followed any alternative method.

Disclaimer:

Statements in this Management Discussion and Analysis describing the Companys objectives, projections and expectations may be "forward looking statement" within the meaning of applicable laws and regulations. Actual result might differ materially from those either expressed or implied. Important factors that materially affect the future performance of the Company include the State of the Indian economy, changes in government regulations, tax laws, input availability and prices, and the state of financial markets and other factors such as litigation over which the Company does not have direct control.