Hampton Sky Realty Ltd Management Discussions

ECONOMIC OVERVIEW

In the financial year 2024 25, the Indian real estate sector witnessed significant growth, supported by a stable macroeconomic environment, increased urban housing demand, and government policy measures such as PMAY (Urban) 2.0 and GST reductions on construction materials. The sector contributed around 13% to Indias GDP, with strong performance in both residential and commercial segments. Luxury housing saw a sharp increase in sales, while investments especially foreign inflows hit record highs.

However, the sector also faced notable challenges. High property prices in urban areas, despite rising demand, led to affordability concerns for middle- and lower-income groups. Project delays and compliance issues, especially among smaller developers, continued to affect buyer confidence. In some regions, sluggish demand in affordable housing and a mismatch between supply and actual market needs posed constraints. Additionally, rising interest rates in the early part of the year temporarily impacted home loan affordability. While the national sector recorded strength in residential and commercial demand, Punjabs real estate market faced significant headwinds. A prolonged agricultural slowdown, subdued rural incomes, elevated state debt, and outward migration dampened housing demand among local buyers. Despite these drawbacks, the sector remains a key contributor to Indias economic growth and is expected to maintain a positive trajectory with reforms and infrastructure expansion.

In the financial year 2024 25, Indias real estate industry continued to evolve into a more diversified, technology-driven, and investor-friendly ecosystem. Structurally, the momentum shifted from traditional metros toward suburban and driven by accelerating urbanization, infrastructure development, and growing affordability developers now source nearly half of their land acquisitions in non-metro areas. Policy reforms and regulatory enhancements played a pivotal role: RERA expanded transparency and accountability, GST rationalizations reduced construction costs, and PMAY (Urban) 2.0 channelled substantial capital into affordable housing development.

The residential segment in particular has exhibited a surge with the fundamental growth drivers falling into place and thereby had an astounding progress in 2024, setting new sales records in across the top tier cities, further demonstrating the industrys prominence as one of Indias fastest growing industries. The industry remains cognizant of the evolving market conditions with developers exhibiting adaptability along with agility to respond to the current situation. The Central and some State Governments have been proactive in taking steps to boost the housing industry. Various fiscal incentives announced by certain states, including stamp duty waiver and reduced charges, have aided growth. The establishment of a Special Window for Affordable and Mid-Income Housing (SWAMIH), to provide last mile financing for completion of stalled housing projects, is also aiding in completion of projects which had been held up and instilling further confidence in the consumers. Housing for All under the Pradhan Mantri Awas Yojana and continued tax incentives for affordable segment provided by the Government will further boost sector dynamics. Consolidation in favour of the large, credible and organised players is clearly evident in the residential segment.

As India awaits policy reforms to pick up speed, your Company firmly believes that the demand for Real Estate in a country like India should remain strong in the medium to long term. Your Company holds a steadfast belief in the enduring strength of the countrys Real Estate demand. This confidence is underpinned by several core strengths that set your Company apart.

Firstly, the Pradhan Mantri Awas Yojana Urban 2.0 initiative supported by a significant investment continues to enhance housing accessibility for economically weaker sections as well as low and middle-income groups during FY 2024 25. In this evolving landscape, our well-established brand enjoys strong recognition and trust among customers and stakeholders. The Company has built a solid reputation for delivering contemporary architectural designs and meticulously planned projects, strategically located to cater to the evolving preferences of todays discerning homebuyers.

Secondly, the Company maintains a strong financial position, underpinned by a resilient balance sheet. This financial strength enables us to effectively navigate economic uncertainties while delivering consistent performance across market cycles. The continued trust and confidence of our customers and shareholders further solidify our standing as a preferred and reliable player in the real estate sector.

Thirdly, our customer-centric philosophy continues to drive loyalty and trust, while our investors remain confident in the Companys long-term growth and profitability potential. With a forward-looking mindset, we are strategically positioned to capitalize on emerging opportunities through the acquisition of new land parcels. This proactive approach is designed to enhance our development pipeline, diversify our real estate portfolio, and position the Company for sustained growth and market leadership.

In conclusion, our Companys confidence in the sustained growth of Indias real estate sector, combined with our established brand reputation, modern architectural approach, strategically located developments, robust financial foundation, and strong appeal among customers and shareholders, positions us advantageously to capitalize on emerging opportunities and further strengthen our presence in the market.

While the management of your Company remains confident in its ability to identify and capitalize on emerging opportunities in FY 2025 26, it also acknowledges the presence of several key challenges that may impact operations and growth:

1. Macroeconomic Uncertainty: Fluctuations in interest rates, inflationary pressures, and global economic volatility may affect buyer sentiment, construction costs, and overall investment appetite.

2. Regulatory Complexities: Navigating evolving regulatory frameworks, including RERA compliance, environmental clearances, and state-specific land acquisition norms, continues to pose operational and project execution risks.

3. Unanticipated delays in project approvals: The real estate sector often faces delays in obtaining necessary approvals from regulatory authorities, leading to project timelines getting extended. These delays can result from bureaucratic processes or changing government policies.

4. Availability of accomplished and trained labour force: Finding skilled and trained labour for real estate projects can be challenging. The sector requires a workforce with diverse skill sets, including construction, design, and project management, and the availability of such accomplished labour can be limited.

5. Increased cost of manpower: The cost of hiring skilled labour has been on the rise, impacting project budgets. The scarcity of skilled workers and increasing demand for labour in the construction industry contribute to the rising costs.

6. Rising cost of construction due to commodity prices: Fluctuations in commodity prices, such as steel, cement, and other building materials, can significantly impact construction costs. Price increases in these essential materials can strain project budgets and profitability.

7. Growth in auxiliary infrastructure facilities: As real estate projects continue to expand, the demand for supporting infrastructure, such as roads, water supply, and sewage systems, also increases. Providing adequate auxiliary infrastructure can be a challenging and costly task for developers.

As defined in Ind AS 108 "Operating Segments", the companys entire business falls under these Operational segments:

1. Real Estate Comprising development, construction, and sale of residential and commercial real estate projects.

2. Trading and Other Division Encompassing trading activities in shares, securities, and other related business operations.

The detailed segment-wise financial performance, including segment revenue, results, assets, and liabilities, is disclosed in the Notes to the Financial Statements, which form an integral part of the Companys Annual Report.

The Companys Financial Performance during the Year under review as compared to the previous year is summarized as below:

Amount (Rs. in lakh

Pursuant to the Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the key financial ratios along with the details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in such ratios and any changes in Return on Net Worth of the Company including explanations thereof are given below:

FY 2024 25 was a testing year for Hampton Sky Realty Limited. After the encouraging performance of the previous year, the Company faced significant headwinds, with sales moderating sharply and profitability under pressure. These results reflect both sectoral challenges and the natural timing gaps associated with large-scale projects that are yet to reach completion. While the short-term financials have been difficult, the Companys fundamentals including a diversified portfolio and manageable debt profile remain intact.

During the year under review, the Company achieved a key milestone by entering into a strategic partnership with Indian Hotels Company Limited (IHCL) and its subsidiary, Roots Corporation Limited (RCL), to develop two hotel properties in Ludhiana. Hampton will provide land for these projects, with one hotel to be operated under IHCLs "Gateway" brand and the other leased to RCL and run under the "Ginger" brand. These partnerships represent an important step forward in Hamptons hospitality business, creating avenues for recurring revenues while enhancing the citys hospitality landscape.

To further support diversification, the Company incorporated two wholly owned subsidiaries Hampton Sky Hotels Private Limited and Hampton Sky Hospitality Private Limited and formed a joint venture, Hampton Sky Farms Private Limited. These structural expansions mark a deliberate move to strengthen the hospitality vertical and explore opportunities in agriculture and allied businesses, reinforcing the Companys commitment to long-term scalability and value creation.

Looking ahead, the future years are expected to be a period of consolidation and groundwork. Key developments such as the Hampton Narayana Super

Specialty Hospital and the Hampton Estate project in Ludhiana are progressing and, once operational, are poised to add meaningful revenue streams and improve margins. Although near-term performance may remain subdued, Hampton Sky Realtys diversified project pipeline and strategic partnerships provide a strong foundation for recovery. With disciplined execution, prudent financial management, and sustained stakeholder engagement, the future years shall mark the beginning of a more sustainable growth trajectory and set the stage for long-term value creation.

In the course of its business, the Company is exposed to stiff competition from other established developers in the market. In addition, it is exposed to certain market related risks, such as rising labour and finance costs, increase in interest rates and foreign currency rates, market price fluctuation, customer and sales volume risks, changes in the government policies, unanticipated delays in project approvals and execution risk which are explained as below:

1. Market Price Fluctuation:

The performance of our Company can be influenced by the sales and rental prices of our projects. These prices are influenced by various factors, including prevailing market conditions, project location and nature, brand reputation, and project design. Despite this, our Company follows a prudent business model to ensure a steady cash flow, even in adverse pricing scenarios.

2. Sales Volume:

The volume of bookings we receive depends on several factors, such as our ability to design projects that meet customer preferences, obtaining necessary approvals on time, general market conditions, the successful launch of projects, and customer trust in entering sale agreements before receiving project possession. We typically sell our projects in phases based on project type, scale, and market conditions.

3. Execution:

The successful execution of our projects depends on several factors, including the availability of labour, raw material prices, timely receipt of approvals and clearances, access to utilities, weather conditions, and the absence of contingencies like litigation. Our Company diligently manages these challenges through cautious planning and engagement of established and reputable contractors.

4. Financing Costs:

The acquisition of land and development rights requires substantial capital outlay. Insufficient funding resources and high-interest costs may impact our regular business operations. To mitigate this, we strive to build sufficient reserves from operating cash flows, allowing us to seize land acquisition and development opportunities efficiently.

Despite all the risks, the Company is well posed with the competitive advantages, as detailed in the above given paras, to mitigate all such risks.

The Directors had laid down Internal Financial Controls procedures to be followed by the Company which ensure compliance with various policies, practices and statutes in keeping with the organizations pace of growth and increasing complexity of operations for orderly and efficient conduct of its business. Systems have been laid to ensure that all transactions are executed in accordance with managements general and specific authorization. Further, systems are also in place for prevention and detection of frauds and errors and for ensuring adherence to the Companys policies.

Certain statements in this Report describing the Companys projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that would make a difference to the Companys operations include demand supply conditions, raw material prices, changes in government regulations, tax regimes and economic developments within the country and abroad and such other factors. This discussion and analysis should be read in conjunction with the Companys financial statements and notes on accounts.