Prozone Realty Ltd Management Discussions

Economic Overview

Global Economy

The global economy absorbed a large energy shock in 2026 without breaking stride. For a construction business, what matters is not the headline growth figure, but what happened to input prices beneath it. The International Monetary Fund titled its July 2026 assessment Global Economy in Crosscurrents of War and Technology. Conflict in the Middle East disrupted supply. An accelerating artificial intelligence cycle generated demand that offset much of the damage.

Growth held up. The IMF projects global growth of 3.0 per cent in 2026, rising to 3A per cent in 2027. That compares with an average of 3.5 per cent across 2024 and 2025. Against its own April 2026 assessment, the Fund cut 2026 by 0.1 percentage point and raised 2027 by 0.2 percentage points.¹ On a cumulative basis the war has cost the world economy very little output.

Prices are where the shock landed. The IMF assumes oil prices rise 31.8 per cent in 2026, then fall 11.8 per cent in 2027. Its working assumption is an average of USD 89.27 per barrel for 2026 and USD 78.70 for 2027, based on futures markets as of 10 June 2026.² Non-fuel commodity prices are projected to rise 18.6 per cent in 2026 before flattening to 1.3 per cent in 2027. This matters more for construction. Energy feeds cement and steel through kiln fuel, freight and power, so the two price lines move together.

The path through the year was volatile. Brent crude rose above USD 120 per barrel at the peak of the crisis in April 2026. It then fell below USD 80 per barrel in June, averaging USD 89.A per barrel as of 23 June 2026. Progress in talks between the United States and Iran raised expectations that shipping through the Strait of Hormuz would resume.Procurement planning had to cope with a fifty per cent swing in the main cost driver.

That cost pressure has fed into consumer prices, and from there into the cost of capital. World consumer prices are projected at A.7 per cent in 2026 and 3.9 per cent in 2027. Advanced economies sit at 3.0 per cent. The IMF expects inflation to reach target only by end-2027 in Japan and the United States, and not until 2028 in the euro area. Monetary policy has turned more cautious as a result. Major advanced economy central banks are likely to pivot toward tightening, reversing the easing path assumed a year ago.

Sovereign bond yields have hardened on fiscal and inflation concerns, even as eguities stayed strong on Al optimism.⁴

Two points here bear on Indian real estate. First, a higher- for-longer global rate structure puts a floor under domestic borrowing costs, and under the return thresholds institutional buyers apply to income-yielding assets. Second, the technology cycle cushioning global growth is itself a source of demand for Grade A office space in the markets that host it. The same forces sgueezing margins on the cost side are creating occupier demand on the revenue side.

Growth outcomes varied by exposure. Advanced economies are projected at 1.7 per cent in 2026. Emerging markets slow to 3.8 per cent before recovering to A.5 per cent in 2027. The Middle East and Central Asia region moves from 0.7 per cent in 2026 to 6.5 per cent in 2027 as disrupted production returns to normal. World trade volume growth of 3.5 per cent in 2026 was revised up by 0.7 percentage points against April, so trade held up better than the conflict suggested.

1. World Economic Outlook Update, International Monetary Fund, July 2026, Table 1 Source for all IMF growth, inflation, commodity and trade projections in this section unless otherwise stated.

2. World Economic Outlook Update, IMF, July202S, Table 1, footnote 8.

3. Monthly Economic Review, Department of Economic Affairs, Ministry of Finance, June 2028.

4. Monetary Policy Statement, 2026-27, Reserve Bank of India, 5 June 2028.

Indian Economy

The IMF projects global growth of 3.0 per cent in 2026, rising to 3A percent in 2027.

India closed FY2025-26 with real GDP growth of 7.7 per cent.

Real Gross Value Added grew 7.9 per cent. Growth built through the year ratherthan fading. It reached 7.8 per cent in the fourth guarter, against 7.0 per cent a year earlier.⁵

The composition of that growth suited construction and real estate. Gross fixed capital formation grew 10.8 per cent in Q4 FY2025-26, the strongest expansion recorded under the 2022- 23 GDP series and reached 31.6 per cent of nominal GDP. Full- year GFCF growth was 8.2 per cent, with the investment rate

close to 32 per cent. Within services, financial, real estate and professional services grew in double digits. Construction activity stayed firm. The Union Governments fiscal deficit fell to A.A per cent of GDP on provisional actuals, the lowest level since 2018-19.

Cost of capital. The Monetary Policy Committee met from 3 to 5 June 2026 for its 61st meeting. It voted unanimously to hold the policy repo rate at 5.25 per cent and to keep the neutral stance. The standing deposit facility stands at 5.00 per cent. The marginal standing facility and Bank Rate stand at 5.50 per cent. The RBI projects real GDP growth of 6.6 per cent for FY2026-27, on a rising guarterly path, with CPI inflation at 5.1 per cent and core inflation at A.7 per cent. Inflation is projected to peak at 5.9 per cent in the third guarter. On that basis, rates are more likely to hold than to fall in the near term.⁶

Sector credit. Bank credit to commercial real estate grew 17.5 per cent year on year as of 30 April 2026. That is faster than overall

bank credit growth of 16.0 per cent. Credit outstanding to the segment stood at ?6,35,A0A crore. Housing loans, which fund residential absorption, grew 11.A per cent to ?33,51,752 crore. Credit to housing finance companies rose 16.7 per cent. On this evidence, lender appetite for the sector has not tightened.⁷

Construction inputs. Physical activity held up even as the core industries index slowed to 0.5 per cent in May 2026. Cement output grew 8.A per cent and steel output 5.0 per cent year on year. Electricity generation rose 8.7 per cent. The cost side weakened sharply. WPI inflation jumped to 9.68 per cent in May 2026 from 8.26 per cent in April. Manufacture of basic metals inflated 12 per cent and chemicals 13.A per cent. This is cost- push pressure from the West Asian conflict working straight into construction materials. Retail inflation has not caught up at 3.93 per cent in May against a A per cent target, so pass-through is still to come.

Consumption and retail demand. The RBIs latest Consumer Confidence Survey showed sentiment weakening. The urban Current Situation Index stayed in pessimistic territory on general economic conditions, employment and spending. The Future Expectations Index eased but remained in optimistic territory. Passenger vehicle sales picked up while rural automobile sales slowed.⁸ The RBI expects services activity, the continuing effect of GST rationalisation and stable employment to support urban consumption.

Public investment. The Union Budget 2026-27 raised public capital expenditure to ?12.2 lakh crore from ?11.2 lakh crore in BE 2025-26. It budgeted the fiscal deficit at A.3 per cent of GDP against A.A per cent in RE 2025-26, with debt to GDP easing to 55.6 per cent.⁹ Sustained infrastructure spending remains the main public driver of land values and urban connectivity.

The external account stayed comfortable. The current account deficit was USD 25.2 billion in FY2025-26, or 0.6 per cent of GDP, unchanged as a share of GDP from the year before. Foreign exchange reserves stood at USD 689.A billion at end-March 2026, giving import cover of about 10.3 months. Total exports of goods and services grew 15.8 per cent year on year in May 2026, and merchandise exports reached their highest ever monthly value.

Risks are specific. A deficient south-west monsoon would weigh on rural demand. Energy costs could pass into general inflation through second-round effects. Global supply chains remain volatile.

Industry Structure and Developments

Indian Real Estate Sector

A sector moving from fragmented private ownership to institutionally managed platforms. The land record itself is being digitised. That changes what can be underwritten.

Indian real estate enters FY2027 as a systemically important sector rather than a cyclical one. It contributes nearly 7.3 per cent to Indias GDP as of November 2025. It is also the countrys second-largest employment generator, with links across construction, allied industries, and services.

The scale trajectory is steep. The market was valued at USD 650 billion in 2025, up from USD 180 billion in 2020 and USD 120 billion in 2017. It is projected to reach USD 1,000 billion by 2030 and USD 5.8 trillion by 2047. A parallel assessment prepared for CM places the 2047¹⁰ figure at USD 10 trillion, within a scenario band of USD 5 trillion to USD 10 trillion.¹¹ The two differ on scope rather than direction. Both describe an expansion of an order of magnitude.

Four demand drivers sit beneath this. Urbanisation is expected to take about 590 million people, or 39 per cent of the population, into urban areas by 2036. Public capital expenditure has risen sixfold to a budgeted USD 128.5 billion in FY2027. Monetary easing, through the RBIs 25 basis point repo cut in December 2025 to 5.25 per cent, has lowered borrowing costs and improved EMI affordability. GCC expansion, with roughly 1,700 centres operating in 2025, is driving office demand and rental growth.

The more conseguential shift for asset owners is institutional. Over USD 15.8 billion has been unlocked through asset monetisation via REITs and InvITs. This reflects a market moving from fragmented private ownership towards institutionally managed, transparent platforms. Institutional investment stood at USD A.3 billion as at October 2025, and rising REIT adoption is improving transparency and liguidity across commercial and residential assets. The Union Budget FY2026 allocated USD 10.5 billion to the Urban Challenge Fund.

What makes this capital deployable is a set of reforms that did not exist a decade ago. Over 360 million land parcels now carry geo-referenced unigue identifiers across 29 states and union territories. Nearly 89 per cent of sub-registrar offices are integrated with revenue systems for real-time record updates.

The National Blockchain Framework had verified over 3A crore property documents as at October 2025. The SVAMITVA scheme has turned undocumented rural and peri-urban holdings into formally recognised collateral. Together, these address the opacity around land records, title certainty and ownership transfer that long held institutional money back.

Technology adoption has moved faster than in most sectors. Al adoption in Indias corporate real estate sector rose from under 5 per cent in 2023 to 91 per cent in 2025. That is a two-year shift ratherthan a gradual migration. It replaces individual judgment with data that institutional investors can audit.

Demand evidence supports the picture. In the first guarter of 2026 alone, foreign firms leased a record 9.1 million sguare feet of office space across Indias top nine cities.

For an asset owner, the practical change is in the buyer universe. Exits were once negotiated between private parties on relationship terms. Stabilised income-yielding assets now attract bids from private eguity funds, sovereign wealth funds and REIT platforms applying auditable standards. That widens the pool of buyers and narrows the discount long applied to Indian real estate. It also raises the disclosure and governance standard an asset must meet to attract that bid.

Indian Retail Sector

Indias organised retail real estate market has tightened at the top end. Beneath it sits a large stock of ageing assets that no longer perform.

Existing retail inventory across the top seven cities stood at 92.A million sguare feet in 01 2026. A further A6.1 million sguare feet is under construction or proposed for delivery between 2026 and 2030. Gross leasing totalled 3.1 million sguare feet in 01 2026, down 15 per cent on the previous guarter from an elevated base. The fall reflects the absence of sizeable new supply rather than weaker occupier appetite. Only 0.25 million sguare feet of new supply was added in the guarter, all of it in Kolkata.

That supply constraint has pushed vacancy down. Pan-India vacancy fell A0 basis points to 11.9 per cent in 01 2026 from 12.3 per cent in 0A 2025. Market rents stood at INR 292.A per sguare foot, with net absorption of 0.8 million sguare feet. Domestic brands accounted for 79 per cent of leasing volume, while international brands continued steady store expansion.¹²

The headline vacancy figure hides a sharp guality divide. Grade A and A+ retail assets in key metropolitan markets are running at a vacancy of roughly 0 to 2 per cent, with rental growth of 6 to 10 per cent year on year. Grade A+ assets have appreciated faster, at 8 to 12 per cent, against 6 to 8 per cent for Grade A. The gap is widening on asset guality.

Lease structures have matured in ways that matter to valuation. About 7A per cent of transactions now follow hybrid revenue- linked models, and nearly 75 per cent of leases are locked for three-to-seven-year tenures. Both improve income visibility and

stability. Those are the characteristics that qualify retail assets for REIT platforms. On that basis, a core institutional investment opportunity of roughly USD 25 billion to USD 30 billion exists across stabilised Grade A retail portfolios in Indias top cities.

The other side of the market is a value-add and redevelopment opportunity of about AO to 50 million square feet. It arises from underperforming Grade B and C malls suffering obsolescence through poor planning, weak tenant mix and shifting consumer preference. The rental gap of two to three times between optimised vanilla retail and anchor-led formats shows the upside available through repositioning.¹³

Underlying consumption supports the asset class. Indias retail sector was valued at USD 1.06 trillion in 202A and is projected to reach USD 1.93 trillion by 2030. Online retail will grow from USD 75 billion in 202A to USD 260 billion by 2030, taking its share from 7 per cent to 1A per cent of total retail. On those figures, 86 per cent of retail remains physical even at the end of the decade. Gen Z will account for A3 per cent of Indias total consumption in 2025, with direct spending power of USD 250 billion. Tier II and III cities now generate over 60 per cent of all e-commerce transactions. ¹⁴ A separate assessment sizes the opportunity at nearly ?200 trillion over the next decade, with organised retailers positioned to take a disproportionate share.¹⁵

For a shopping centre owner, the reading is clear. Grade A rental growth and near-zero vacancy are driven by supply and

should hold through the near-term pipeline. The A0 to 50 million square feet of obsolete stock is both a competitive threat and an acquisition opportunity, depending on which side of the quality line an asset sits.

Residential Real Estate in India

Volumes are flat, and values are rising. The market is trading up. Luxury has doubled its share of sales in five years, from 21 per cent to 42 percent.

The residential market has entered a phase of consolidation. Volume growth has stalled while value growth continues. The divergence reflects a shift in mix rather than weakening demand.

Area sold across the top seven cities is estimated to decline by 0 to 3 per cent to 625 to 6A5 million square feet in FY2026. That follows a 2 per cent year-on-year dip in 9M FY2026, driven mainly by fewer project launches and a high base. Marginal growth of 0 to 3 per cent is expected in FY2027, supported by higher demand in mid and luxury categories and an expected rise in new launches.

Launches fell 3 per cent year on year in 9M FY2026 on delayed approvals. They are estimated to contract 1 to A per cent to 6A5 to 665 million square feet in FY2026. ICRA projects a recovery of A to 7 per cent growth in FY2027, supported by spillover launches, comfortable unsold inventory, smoothening of the e-khata process in Bengaluru, and easier regulatory approvals after the Supreme Court ruling in MMR and Pune. With launches expected to outpace sales, years-to-sell should rise to l.A years as of March 2026 from 1.1 years, and to l.A to 1.6 years by March 2027. That level remains comfortable.

Pricing has carried the market. After 15 per cent average selling price growth in FY2025, ASPs are expected to rise a further 6 to 8 per cent in FY2026 and then A to 7 per cent in FY2027 on a high base. The driver is mix. The luxury segment grew 18 per cent in FY2025 and 10 per cent in 9M FY2026 even as overall sales fell. Its share of total sales rose to 37 per cent in FY2025 and A2 per cent in 9M FY2026, from 21 per cent in FY2020. Affordable housing has contracted sharply. The mid-segment has been broadly stable.¹⁶

Independent market data shows the same pattern. New launches and sales each exceeded 270,000 units in 2025, and unsold inventory fell to about 10 per cent, the lowest level since 2019. Mumbai, Bengaluru and Pune were the main contributors to national housing sales. Premium and luxury segments recorded over 30 per cent growth in annual sales. Developers launched roughly 52,000 luxury units in 2025, a 38 per cent rise year on year. Delhi-NCR, Mumbai and Flyderabad together took about 90 per cent of total luxury sales.

A structural shift occurred within the mid-market. The high-end category, priced between INR 1.25 crore and INR 3 crore, overtook the historically dominant mid-end bracket for the first time, taking 27 per cent of total sales. Buyers are paying for upgraded living environments and premium project attributes.

Financing conditions remain supportive. Funding availability was strong, with heavy deployment from domestic banks alongside growing private credit fund participation. That compressed the cost of capital and limited distressed-asset opportunities. On the consumer side, home loan gross NPAs stood at about 0.9 per cent per the RBIs Financial Stability Report.¹⁷

ICRAs sector outlook is Stable. Amid consolidation, established developers are positioned to outperform through market share gains and improving buyer confidence. They have deleveraged materially over two to three years on healthy operating cash flows and capital raised through QIPs and IPOs. Prolonged conflict in West Asia is the main downside risk to these estimates.

Commercial Real Estate in India

Indias office market set a record in 2025.

The fourth quarter set one of its own. Global Capability Centres now drive more than 40 per cent of office leasing. That is structural.

Indias office market recorded its strongest year in 2025, extending a run of successive peaks since 2023.

Gross leasing reached 83.3 million sguare feet for the full year, exceeding the previous peak by 7.8 per cent. Q4 2025 alone reached an all-time guarterly high of 26.8 million sguare feet. Net absorption rose to a record 57.0 million sguare feet, up 14.1 per cent year on year. It was driven by strong pre-commitments in new completions and fresh space take-up, which points to genuine headcount expansion ratherthan churn. Global firms accounted for 58.4 per cent of leasing.

Performance was broad-based. Bengaluru, Hyderabad, Pune and Mumbai each recorded their best year. Bengaluru held leadership with a 29.0 per cent share of gross leasing, followed by Delhi NCR at 20.9 per cent. Mumbai and Hyderabad followed with nearidentical shares of 14.0 per cent each. Mumbai leased 11.6 million sguare feet in 2025, up 13.0 per cent year on year. Pune grew fastest at 18.2 per cent.

Occupier composition has shifted. Flex was the largest occupier segment for a second consecutive guarter, with its 04 share rising to 26.6 per cent. IT and ITeS followed at 21.2 per cent, manufacturing at 16.1 per cent and BFSI at 13.7 per cent. Flexible space now leads traditional IT leasing, which marks a change in how corporate India consumes office space.¹⁸

The structural anchor beneath this demand is the Global Capability Centre. GCCs now account for more than 40 per cent of total gross office leasing across the top seven cities. As at end-2024, India housed over 1,700 GCCs employing more than 1.9 million professionals. The sectors market size more than doubled from USD 30 billion in 2019 to about USD 64 billion in 2024. It is projected to reach USD 105 billion to USD 110 billion by 2030 at a 10 per cent CAGR. By 2030, the count is expected to pass 2,400 centres employing more than 2.8 million professionals.

Geographic concentration is high but loosening. Bengaluru hosts more than 875 centres, or 29 per cent of the national total, and took over a third of Indias GCC leasing in 2025. Pune followed at 15 per cent, with Delhi-NCR and Hyderabad at 14 per cent each. GCC operations are also extending into Tier 2 markets. Jaipur, Kochi, Indore, Surat and Coimbatore are emerging as the next wave of destinations.

Office leasing across the top seven cities reached about 80.5 million sguare feet in 2025, of which GCCs accounted for 32.5 million sguare feet. Grade A office stock touched nearly 800 million sguare feet, with Bengaluru and NCR together making up close to half of the total supply.

Institutional infrastructure is developing alongside. Five listed REITs command a market capitalisation of nearly USD 18 billion and have opened property investment to retail participants.

REITs still represent just 20 per cent of institutional real estate, well below mature markets such as the United States, Singapore and Japan. That leaves substantial headroom for further institutionalisation of income-yielding commercial assets.¹⁹

Mumbai Metropolitan Region

MMR mall rentals are rising 15 to 20 per cent on new leases, against a pipeline of just 4 million sg ft to 2051. Every key Mumbai micro-market is anchored by an established Grade A mall. Entry is by acquisition.

The Mumbai Metropolitan Region is Indias most mature and most supply-constrained real estate market. The arithmetic of that constraint defines the opportunity there.

MMRs retail stock stands at 17.45 million sguare feet, against a cumulative pipeline of only about 4 million sguare feet between 2026 and 2031. Supply is phased and thin at the front end. Near- term addition in 2026 is limited to roughly 0.25 million sguare feet. It peaks at about 1.80 million sguare feet in 2028 and 1.20 million sguare feet each in 2027 and 2030, then tapers after 2030.

That scarcity shows in pricing. Average mall rentals across Grade A and A+ assets in MMR stand at about INR 400 to 450 per sguare foot on a chargeable basis for vanilla stores. Asset-level dispersion is wide, running from INR 332 to 344 per sguare foot at the lower end to INR 731 to 777 per sguare foot for premiumperforming malls. Micro-market and asset guality drive sharply different outcomes. Recent leasing transactions reflect 15 to 20 per cent year-on-year rental growth, well ahead of the 6 to 10 per cent recorded across Grade A assets nationally.

Vertical stratification within assets is pronounced. Ground floor rents in benchmarked MMR assets peak at about INR 919 per sguare foot, against INR 689 to 701 for second and third floors, and fall sharply to INR 157 at the fourth floor. Ground floors consistently outperform upper levels by 10 to 30 per cent. Common area maintenance charges cluster in the INR 20 to 40 per sguare foot per month band for 66.1 per cent of MMR deals, below the levels seen in Delhi and Gurugram.

All key micro-markets in Mumbai are anchored by established Grade A malls, offering diverse brand mix and positioning. Where new development is happening, it is concentrated in suburban micro-markets such as Thane, Borivali, Panvel, Dombivli and Bhiwandi. That reflects a shift towards high-growth residential catchments and emerging consumption hubs ratherthan the established core.²⁰

The commercial market shows similar strength. Mumbai recorded its best-ever year for office leasing in 2025 at 11.6 million sguare feet, up 13.0 per cent year on year, holding a 14.0 per cent share of national gross leasing. Activity accelerated through the year, with QA 2025 leasing of A.2 million sguare feet against 2.A million in 03.²¹

On the residential side, MMR remains one of the top seven markets tracked nationally. It was among the main contributors to overall housing sales in 2025, alongside Bengaluru and Pune. Mumbai is also one of three markets, with Delhi-NCR and Hyderabad, that together took about 90 per cent of Indias luxury housing sales.²² Regulatory friction is easing. ICRA cites the Supreme Court ruling in MMR and Pune as a factor expected to smooth approvals and support the A to 7 per cent launch recovery projected for FY2027.²³

Demand indicators in MMR are the strongest in the country across all three asset classes. The supply response, particularly in retail, is constrained through the end of the decade. That combination favours owners of existing guality stock. It also makes acguisition, rather than greenfield development, the realistic route to scale.

Opportunities and Threats

Scarce supply in Mumbai is the opportunity. Input cost inflation is the threat. Grade A assets are scarce and expensive. Grade B and C assets are neither.

Opportunities

Supply scarcity in the Mumbai Metropolitan Region. MMR holds 17.45 million sguare feet of retail stock. The pipeline to 2031 is only about 4 million sguare feet, and just 0.25 million sguare feet of that arrives in 2026. Recent leasing transactions in the region show rental growth of 15 to 20 per cent year on year, against 6 to 10 per cent for Grade A assets nationally.²⁴ Where new supply cannot arrive guickly, owners of existing guality stock hold pricing power.

An institutional bid for stabilised retail. Around 74 per cent of mall lease transactions now follow hybrid revenue-linked structures, and nearly 75 per cent run for three to seven years. That gives the income visibility REIT platforms reguire. The estimated core institutional opportunity across stabilised Grade A retail portfolios in Indias top cities is USD 25 billion to USD 30 billion. Nationally, over USD 15.8 billion has already been unlocked

through REIT and InvIT monetisation,²⁵ and listed REITs still account for only 20 per cent of institutional real estate. The pool of buyers for guality income-yielding assets is deeper than it has been.

An obsolescence gap that can be bought. Roughly 40 to 50 million sguare feet of Grade B and C mall stock is losing relevance through poor planning, weak tenant mix and changing consumer preference. Optimised vanilla retail commands two to three times the rent of anchor-led formats. Assets that can be repositioned are available at prices that reflect their current performance ratherthan their potential.

A residential market trading up. Volumes are flat, but values are rising. Average selling prices are expected to grow 6 to 8 per cent in FY2026, and the luxury share of sales has moved from 21 per cent in FY2020 to 42 per cent in 9M FY2026. Launches are projected to recover by 4 to 7 per cent in FY2027, helped by easier approvals following the Supreme Court ruling in MMR and Pune.²⁶

Office demand reaching the Companys existing markets. Gross office leasing hit a record 83.3 million sguare feet in 2025. Global Capability Centres now drive more than 40 per cent of leasing and are projected to grow from about USD 64 billion in 2024 to USD 105 billion to USD 110 billion by 2030. Their expansion is moving beyond the established metros, and Coimbatore and Indore are named among the next wave of GCC destinations, alongside Jaipur, Kochi and Surat.

Available credit. Bank credit to commercial real estate grew 17.5 per cent year on year to April 2026, ahead of overall credit growth of 16.0 per cent.²⁷ Housing loans grew 11.4 per cent. Lenders have not withdrawn from the sector.

Threats

Input cost inflation. This is the most immediate pressure. WPI inflation reached 9.68 per cent in May 2026, up from 8.26 per cent in April, with basic metals inflating 12 per cent.²⁸ Non-fuel commodity prices are projected to rise 18.6 per cent globally in 2026. Retail inflation stood at 3.93 per cent over the same period, so a large part of the increase has been absorbed rather than passed on. Construction margins carry that gap.

A rate environment unlikely to ease. The repo rate has been held at 5.25 per cent with a neutral stance. The RBI projects CPI inflation of 5.1 per cent for FY2026-27, peaking at 5.9 per cent in the third guarter. Major advanced economy central banks are expected to move towards tightening. Borrowing costs and buyer affordability are both affected.

Weakening urban consumer sentiment. The RBIs Consumer Confidence Survey shows the urban Current Situation Index in pessimistic territory on economic conditions, employment and spending. Mall footfall and tenant sales depend on discretionary spending.

Residential inventory building. Area sold across the top seven cities is estimated to decline 0-3 per cent in FY2026, while launches are set to outpace sales. Years-to-sell is expected to

rise to 1A years by March 2026 from 1.1 years, and to between 1A and 1.6 years by March 2027.

External and seasonal risks. ICRA identifies prolonged conflict in West Asia as the principal downside risk to its residential estimates. A deficient south-west monsoon would weigh on rural demand.

Strategic Transformation

Consolidation of Ownership in Operating SPVs

We successfully transitioned our core operating joint ventures into wholly owned subsidiaries. This milestone brings a productive fifteen- year partnership to a successful conclusion, securing complete strategic alignment.

The Company acguired 38.50 per cent of Hagwood Commercial Developers Private Limited from Triangle Real Estate India Investments Ltd and Pearlscope Ltd. Kruti Realtors and Developers Private Limited, a wholly owned subsidiary, acguired

38.50 per cent of Alliance Mall Developers Co. Private Limited from Triangle Real Estate India Holdings Ltd and Pearlscope Ltd, and 65.29 per cent of Empire Mall Private Limited from Triangle Real Estate India Projects Ltd, Pearlscope Ltd and Nailsfield Ltd.²⁹ Each acguisition was made under a separate share purchase agreement.

The acguisition was completed on 30 March 2026, within the financial year.³⁰

The effect was to bring the Companys three principal operating subsidiaries under full ownership for the first time. Alliance and Empire together contributed 68.25 per cent of consolidated turnover and 53.83 per cent of net worth in FY2024-25, so the transaction consolidated control over the majority of the Companys operating base.³¹

A residual holding in Hagwood was acguired after the year-end, on 6 April 2026.

A Planned Transition to High-Growth Horizons: Monetising Maturity for Future Scale

A planned, value-accretive monetisation of mature, peak-performing retail assets to selffund our next high-growth cycle.

On 31 March 2026, the Board granted in-principle approval to explore the strategic disinvestment of the Companys shareholdings in Kruti Realtors, Alliance Mall Developers, and Empire Mall to a prospective institutional buyer, Inorbit Malls (India) Private Limited or its affiliates, at a mutually agreed price. This landmark decision represents a planned, value- accretive milestone in our capital-cycling strategy, not a reactive divestment.

By executing this transition in a precise chronological seguence, the Company acted from a position of maximum operational and financial strength. First, we consolidated 100% ownership of

these principal operating subsidiaries, concluding a productive fifteen-year partnership on mutually beneficial terms. Securing absolute, unencumbered ownership was a crucial strategic prereguisite: it granted us the total flexibility to negotiate and execute the subseguent transaction at a premium, mutually agreed valuation.

This disinvestment represents the timely monetisation of highly successful, mature retail assets operating at peak health·marked by Q4 FY2026 occupancy levels of 94% at Chhatrapati Sambhaji Nagar and 96% at Coimbatore. By converting these fully optimised assets into robust capital reserves, we are positioned to redirect unencumbered liguidity toward high-yield developments in prime Mumbai markets, thereby unlocking exponential long-term value for our shareholders.

Capital Redeployment: Scaling in Premium Metros

Utilising post-divestment liquidity to capture landmark commercial assets in Mumbais most resilient catchments.

The net proceeds from this strategic disinvestment are earmarked for active reinvestment to accelerate our urban footprint, transitioning our focus to high-value metropolitan environments. We are targeting the acguisition of premium Grade A commercial office and retail platforms in prime locations across the Mumbai Metropolitan Region (MMR). Because the MMR retail market is highly supply-constrained·with a projected pipeline of just 4 million sguare feet through 2031 against an existing stock of 17.45 million sguare feet·strategic acguisition, ratherthan greenfield development, represents the most realistic and value- accretive pathway to immediate scale. Entering this resilient market allows us to deploy our fifteen years of institutional retail governance and leasing expertise in a high-barrier territory where premier assets command strong pricing power and lease growth.

From a financial standpoint, this transition will fundamentally optimise our capital structure. After accounting for targeted debt retirement and long-term capital gains adjustments, the transaction will generate significant net cash. This highly liguid, self-funded capital base will serve as a robust, unencumbered foundation to fund our future pipeline, allowing us to capture high-yield urban opportunities with absolute agility and without relying on dilutive external capital.

Financial and Operational Performance

Financial Highlights

Profit before tax swung by nearly 30 crore rupees. Most of it came from costs, not revenue. Operating cash generation rose 86 percent.

? lakh (consolidated)	FY2026	FY2025	Change
Revenue from	19,522.18	17,872.52	+9.2%
operations
Other income	1,717.90	1,249.17	+37.5%
Total income	21,240.08	19,121.69	+11.1%
Finance costs	4,416.49	3,768.15	+17.2%
Depreciation and	2,304.48	2,298.55	+0.3%
amortisation
Other expenses	5,511.25	7,225.51	-23.7%
Total expenses	18,570.60	19,426.70	-4.4%
Profit before tax	2,758.28	(224.87)
Tax expense	969.06	5,211.06	-81.4%
Net profit	1,789.22	(5,435.93)
Attributable to owners	1,068.84	(3,792.52)
Earnings pershare(?)	0.70	(2.49)

Profit before tax improved by ?2,983.15 lakh. The composition matters. Revenue contributed ?1,649.66 lakh of the improvement, and other income a further ?468.73 lakh. The largest single contributor was other expenses, which fell ?1,714.26 lakh. Finance costs moved the other way, rising ?648.34 lakh.

The far larger swing in net profit, from a loss of ?5,435.93 lakh to a profit of ?1,789.22 lakh, is mostly a tax effect. FY2025 carried a deferred tax charge of ?5,005.91 lakh. FY2026 carried ?1,120.51 lakh. Excluding tax entirely, the improvement at the pre-tax line is ?2,983.15 lakh rather than ?7,225.15 lakh.

Standalone results differ in character. Standalone revenue from operations was broadly flat at ,044.93 lakh against ?1,048.88 lakh. Standalone profit after tax was ?719.18 lakh. Standalone total comprehensive income, however, was ?30,822.56 lakh, driven by a fair value gain on financial assets of ?35,131.37 lakh. That gain

represents remeasurement of investments in subsidiaries and the joint venture, following an independent valuers assessment of the underlying properties.⁴³

That gain does not survive consolidation. Investments in subsidiaries are eliminated on consolidation, and consolidated fair value movement on financial assets was a loss of ?883.88 lakh. Consolidated total comprehensive income was ?1,026.43 lakh.

Key Financial Ratios and Significant Changes

Ratios are computed from the audited consolidated financial statements. Turnover ratios use closing balances, as opening balances for FY2024 are not presented in the results.

Ratio	FY2026	FY2025	Change
Current ratio	1.97	1.96	+0.5%
Debt-equity ratio	1.44	0.90	+60%
Interest coverage ratio	1.62	0.94	+72%
Debtors turnover	11.87	14.36	-17.3%
Inventory turnover	0.49	0.46	+4.4%
Operating profit margin	27.95%	12.84%	+118%
Net profit margin	9.16%	(30.41)%	sign reversal

Four ratios moved by more than 25 per cent and reguire explanation.

Debt-equity ratio, 0.90 to 1 .44. Total borrowings rose from ?42,216.89 lakh to ?65,491.87 lakh.

Interest coverage ratio, 0.94 to 1.62. Earnings before interest and tax rose from ?3,543.28 lakh to ?7,174.77 lakh, while finance costs rose from ?3,768.15 lakh to ?4,416.49 lakh. Earnings grew faster than interest. The Company moved from not covering its interest charge to covering it 1.6 times.

Operating profit margin, 12.84 per cent to 27.95 per cent.

Operating profit is calculated as profit before tax plus finance costs less other income. The improvement reflects the ?1,714.26 lakh reduction in other expenses and the narrowing of the Outright Sales segment loss.

Net profit margin, negative 30.41 per cent to 9.16 per cent. This is principally the absence of the prior year deferred tax charge, as set out above.

Return on Net Worth

Return on net worth was 2.34 per cent in FY2026, against negative 8.11 per cent in FY2025.

The ratio uses profit attributable to owners of the parent of ?1,068.84 lakh, over equity attributable to owners of ?45,638.27 lakh. The prior year used a loss of ?3,792.52 lakh over equity of ?46,775.82 lakh.

The movement is a reversal from loss to profit rather than an improvement in returns on a stable base. Two points qualify it.

Utilisation of Divestment Proceeds

No divestment proceeds were received during FY2026, and none have been applied.

The Board granted approval on 31 March 2026 to explore the sale. The transaction was approved and the Share Purchase Agreement executed after the year-end, and shareholder approval followed on 29 May 2026.

The Company has stated that the intended use of proceeds is the acquisition of a project in the premium Mumbai Metropolitan Region market, with a focus on Grade A office and retail platforms.

Outlook

The market the Company is leaving is tight. The market it is entering is tighter. Growth holds in FY2027. Costs are the variable to watch.

The macroeconomic setting for FY2027 is supportive without being easy.

The IMF projects global growth of 3.A per cent in 2027, up from 3.0 per cent in 2026. For a construction business, the more relevant projection is on inputs. Oil prices are expected to fall 11.8 per cent in 2027 after rising 31.8 per cent in 2026, and non-fuel commodity prices are expected to flatten to 1.3 per cent growth after an 18.6 per cent rise. If those assumptions hold, the input cost pressure that sgueezed FY2026 margins should ease during FY2027.

Domestically, the Reserve Bank projects real GDP growth of 6.6 per cent for FY2026-27, rising guarterly from 6.6 per cent in the first guarter to 6.8 per cent in the fourth. CPI inflation is projected at 5.1 per cent, peaking at 5.9 per cent in the third guarter. With inflation above target for most of the year, the policy repo rate is more likely to hold at 5.25 per cent than to fall. Borrowing costs should therefore be assumed flat rather than easing.

Public investment continues to support the sector. Union Budget capital expenditure rises to ?12.2 lakh crore in FY2026-27 from ?11.2 lakh crore.

Retail conditions favour owners of quality stock. Grade A and A+ malls are operating at a vacancy of roughly 0 to 2 per cent with rental growth of 6 to 10 per cent year on year. In the Mumbai Metropolitan Region, the cumulative supply pipeline to 2031 is only about A million square feet against existing stock of 17.A5 million square feet, and recent leasing transactions show rental growth of 15 to 20 per cent. Institutional appetite for stabilised retail is estimated at USD 25 billion to USD 30 billion. These conditions support both the value being realised on the proposed disinvestment and the cost of acquiring replacement assets.

Residential conditions are improving in volume. ICRA projects launches across the top seven cities to recover by A to 7 per cent in FY2027, with sales growth of 0 to 3 per cent and average selling

price growth of A to 7 per cent. Years-to-sell is expected at 1.A to 1.6 years by March 2027, which remains comfortable. Approvals are expected to ease following the Supreme Court ruling in MMR and Pune. The Companys retained residential projects at Coimbatore, Nagpur and Indore operate in this environment.

Office demand continues to broaden. Global Capability Centres are projected to grow from about USD 6A billion in 202A to USD 105 billion to USD 110 billion by 2030, with the centre count passing 2,A00. Coimbatore and Indore are named among the next wave of GCC destinations. Both are markets in which the Company already holds land.

For the Company specifically, FY2027 will be defined by three things. The first is completion of the proposed disinvestment, which had not occurred as at the date of the most recent disclosure available. The second is the application of proceeds, both to reduce borrowings of ?65,A91.87 lakh and to fund the intended acquisitions in the Mumbai Metropolitan Region. The third is execution on the retained portfolio, being the balance towers at Coimbatore, the retail development at Nagpur now under advanced approvals, and the remaining plotted phases at Indore.

The principal downside risk identified by ICRA to its residential estimates is prolonged conflict in West Asia. The RBI additionally identifies a deficient south-west monsoon as a risk to rural demand.

Risks and Concerns

Operating in a dynamic and highly regulated sector, Prozone Realty recognises the importance of identifying, monitoring, and mitigating risks that may affect its performance and longterm growth. The Company has established a structured risk management frameworkthat enables proactive responses to emerging challenges, while ensuring business continuity and stakeholder confidence.

Economic Risks

Global growth is projected at 3.0 per cent in 2026 and 3.A per cent in 2027, and India at 6.6 per cent for FY2026-27. The exposure is less to growth than to prices. Input costs rose sharply during FY2026, with WPI inflation reaching 9.68 per cent in May 2026 and basic metals inflating 12 per cent, against retail inflation of 3.93 per cent. Cost increases have been absorbed rather than passed on, and construction margins carry that gap. Prolonged conflict in West Asia remains the principal external risk.

Business Risks

Occupancy at both malls is at or near peak, at 94 per cent and 96 per cent. Growth from that base must come from rental escalation and tenant mix ratherthan from filling vacant space. On the development side, the Outright Sales segment recorded a loss of ?444.93 lakh in FY2026, and the Company retains that segment while selling the profitable Leasing segment. Consumer sentiment is a further concern, with the RBIs Consumer Confidence Survey showing the urban Current Situation Index in pessimistic territory. Mall footfall and tenant sales depend on discretionary spending.

Policy and Regulatory Risks

The real estate sector is inherently sensitive to policy changes relating to interest rates, tax regimes, subsidies, and housing schemes. Shifts in government policy can directly influence borrowing costs, consumer sentiment, and profitability. Prozone manages this by maintaining agile operations, closely tracking regulatory developments, and engaging with industry bodies. Portfolio diversification and proactive adjustments in pricing, marketing, and timelines further safeguard against sudden policy changes.

Brand Risks

As a developer of retail and residential destinations, Prozones brand reputation is central to its success. Negative publicity, adverse events, or heightened competition could impact trust and positioning.

The Company addresses this through rigorous guality control, proactive communication, customer engagement, and partnerships with established retail brands. Regular monitoring of customer sentiment and swift responses to potential issues support brand resilience and longterm loyalty.

Internal Control Risks

Given the scale and complexity of operations, strong governance and robust internal controls are essential to prevent inaccuracies, fraud, or compliance lapses. Prozone has implemented a comprehensive internal control framework supported by independent internal audits, continuous monitoring, and adherence to best-in-class accounting standards. The Audit Committee of the Board plays an active role in reviewing audit findings and ensuring corrective action, thereby reinforcing transparency and accountability.

Environmental Risks

Construction consumes energy and water and generate waste. Regulatory reguirements in these areas continue to tighten. A deficient south-west monsoon is expected during FY2027, with conseguences for water availability and for rural demand.

Technological Risks

Adoption of technology across Indian corporate real estate has moved guickly, from under 5 per cent in 2023 to 91 per cent in 2025. Occupier and consumer expectations move with it. Failure to keep pace in digital engagement, smart building infrastructure and data systems would place the Company at a competitive disadvantage relative to institutionally managed platforms.

Human Resources

The Company regards its people as a principal source of strength and seeks to maintain a supportive and growth-oriented working environment. It provides opportunities for professional advancement and engagement, and it makes operational-level adjustments to align talent with business priorities, with the aim of improving efficiency and deploying resources to meet project eguirements. As of 31 March 2026, the group employed over 97 professionals.

Cautionary Statement

This document contains statements about anticipated future events, financial performance and operational results of Prozone Realty Limited that may be considered forward-looking in nature. These statements rest on assumptions and are subject to risks and uncertainties, and actual outcomes may differ materially. Readers should not place undue reliance on them and should read this report together with the risk factors set out in Section VIII. Certain matters described here occurred after the reporting date of 31 March 2026, including the proposed disinvestment and the acguisitions made or approved thereafter. These are identified with their dates in Section IV and are not reflected in the financial results for the year. Market data and projections attributed to third parties are reproduced from the sources cited in the footnotes and have not been independently verified by the Company. Amounts are stated in Indian Rupees in lakhs unless otherwise indicated.