Sahara Housing Fina Corporation Ltd Management Discussions

Global Economic Overview - Financial Year 2025-2026

The global economy has demonstrated notable resilience through FY 2025–2026, though the pace of expansion has moderated. The global economy proved more resilient than expected, supported by improved financial conditions, rising AI-related investment and trade, and macroeconomic policies - yet underlying fragilities are increasing. Global growth is projected to slow from 3.3% in 2024 to around 3.1–3.2% in 2025 and further in 2026, with advanced economies growing around 1.5% and emerging market and developing economies just above 4%. A key driver of uncertainty has been trade policy: global GDP growth is projected to slow in 2026 as front-loading activity further unwinds and the impacts of higher effective tariff rates are more fully felt. On the inflation front, global headline inflation is expected to decline to 4.2% in 2025 and to 3.5% in 2026, converging back to target earlier in advanced economies than in emerging markets.

Despite these headwinds, certain regions have fared better. Resilient consumption and capital spending are helping underpin global activity, and with inflation continuing to moderate in most major economies, monetary policymakers in the US, UK, and euro zone have room to cut rates. India stands out with fiscal year 2025 on track for an impressive 7% growth rate, though the forecast for 2026 faces headwinds from high US tariffs on Indian exports and elevated uncertainty dampening private sector investment. Meanwhile, AI-driven capital expenditure is emerging as a new structural tailwind, with technology investment increasingly influencing both business spending and long-term productivity potential across major economies.

Source: https://www.oecd.org/en/publications/2025/12/oecd-economic-outlook-volume-2025-issue-2_413f7d0a.html https://www.morganstanley.com/insights/articles/global-economic-outlook-2026

Global Housing Scenario - FY 2025–2026

The global housing market in FY 2025–2026 is transitioning from a period of post-pandemic turbulence toward a more measured equilibrium. Prices are flattening, more inventory is coming online, and rising wages are improving affordability —together setting the stage for stronger sales activity after years of buyers and sellers remaining on the sidelines. The living sector remains the worlds largest real estate investment sector, with growing investor demand across all forms of housing, and for real estate capital markets, the environment strengthened notably in the second half of 2025 with momentum expected to build further through 2026. In the US specifically, fixed-rate mortgage rates are projected to stay elevated above 6%, though adjustable-rate mortgage rates could tick downward if the Fed eases, and homebuilders are continuing to offer rate buydowns to support affordability.

Supply-side constraints remain a persistent challenge globally. New construction starts in Europe are at their lowest levels since 2010, with deliveries projected to decline, creating acute supply shortages of quality space in cities like Tokyo, New York, and London. Housing affordability has become a top issue for many electorates, prompting government interventions such as property taxes, rent controls, and planning reforms — and for institutional investors, this policy uncertainty is delaying decisions. Overall, the housing sector is entering a phase of normalization: luxury markets are rebalancing with stabilizing pricing expectations, resilient demand, and easing inventory pressures — a trend that broadly reflects the wider global story of a housing market recalibrating after years of exceptional volatility.

Source: https://www.barchart.com/story/news/36580909/compass-market-outlook-2026-will-bring-the-most-balanced-housing-market-in-years https://www.jll.com/en-us/insights/market-outlook/global-real-estate

Global Housing Price Movement

The global housing market in FY 2025–2026 presents a picture of sharp divergence. While advanced economies in Southern Europe and select Asian markets recorded double-digit nominal price surges, major markets in East Asia and Canada experienced notable corrections. The weighted average annual price growth across 55 monitored markets stood at approximately 2.3% in Q1 2025, recovering from 1.7% in Q4 2024, yet remaining below the long-run trend of 5.1%.

Key finding: 87% of the 55 tracked global markets recorded positive annual growth, indicating resilience despite elevated interest rates. The bifurcation between supply-constrained, investment-driven markets (Portugal, Turkey) and demand-suppressed, oversupplied markets (China, Hong Kong, Canada) is a defining trend of this financial year.

Southern and Eastern Europe emerged as global outperformers. Portugal (+23.6%) maintained its position as one of the worlds strongest markets for the seventh consecutive quarter of double-digit growth, driven by acute housing supply shortages and sustained demand from international buyers capitalising on falling loan rates. North Macedonia (+22.6%) and Bulgaria (+11%) also posted strong figures, reflecting low baseline effects and ongoing EU integration optimism. In contrast, Germany

(+1.2%) staged only a marginal recovery from its 2023 correction, while Northern European markets remained subdued.

Asia presents the starkest regional divergence. Vietnams capital Hanoi recorded a remarkable 29.6% annual surge in Q1 2025, underpinned by strong urbanisation trends and foreign investment inflows. Japans Tokyo condominium market grew 10.5%, supported by a weak yen making Japanese assets attractive to foreign buyers. India ranked 15th globally (Knight Frank, Q1 2025) with 7.7% nominal growth, outperforming the US, UK, and Australia, driven by strong end-user demand and rising incomes. At the opposite extreme, China (-7.0%) and Hong Kong (-8.0%) recorded the steepest declines globally, owing to developer sector stress, oversupply, and sustained outmigration respectively.

Saudi Arabia (+5.1%) continued its upward trajectory, fuelled by Vision 2030 mega-projects and government-backed foreign investment schemes. Property prices in Riyadh have surged 25–30% over four years. In the Americas, the USA (+4.2%) held steady, supported by persistent supply constraints and domestic migration to sunbelt states, while Canada (-6.2%) stood out as the only major Western market in deep correction territory

Country-Level Summary Table

The following table summarises key housing market metrics across selected jurisdictions for FY 2025–2026;

Country	Region	Annual Change (%)	Market Trend	Key Driver
Turkey	Europe/Asia	+32.2%	Surge	Currency dynamics, inflation hedge
Vietnam (Hanoi)	Asia	+29.6%	Surge	Urbanisation & foreign demand
North Macedonia	Europe	+22.6%	Surge	Low base, EU integration outlook
Portugal	Europe	+23.6%	Surge	Supply shortage, foreign buyers
Japan (Tokyo)	Asia	+10.5%	High	Condo demand, weak yen
India	Asia	+7.7%	High	End-user demand, income growth
Saudi Arabia	Middle East	+5.1%	Moderate	Vision 2030 infrastructure
USA	North America	+4.2%	Moderate	Supply constraints, migration
UK	Europe	+3.8%	Moderate	Rate cuts, housing shortage
Australia	Oceania	+3.1%	Moderate	Population growth, low supply
Germany	Europe	+1.2%	Marginal	Recovery from 2023 correction
Canada	North America	-6.2%	Decline	Affordability ceiling, rate pressure
China	Asia	-7.0%	Decline	Oversupply, developer crisis
Hong Kong	Asia	-8.0%	Decline	Outmigration, high rates

- a result of affordability exhaustion and renewed mortgage rate pressures. Caribbean markets including Costa Rica (+10.3%) and the Dominican Republic (+10.2%) outperformed, driven by foreign direct investment and booming short-term rental demand.

Key Drivers & Market Forces

a) Interest Rate Cycles: Central bank monetary easing in several advanced economies during 2024–2025 reignited buyer sentiment and purchasing power, particularly in Portugal, the UK, and parts of Asia. Markets where rates remained elevated (Canada, Germany) continued to face headwinds.

b) Supply-Demand Imbalances: Chronic housing undersupply in markets like Portugal, India, and Japan continues to exert strong upward price pressure irrespective of financing conditions, creating structurally resilient markets.

c) Foreign Capital Flows: International investor demand — from lifestyle migrants in Portugal and the Caribbean to yield-seeking capital in Japan and Saudi Arabia — amplified domestic price pressures in these geographies.

d) Emerging Market Urbanisation: Rapid urbanisation in Vietnam, India, and parts of the Middle East is creating durable housing demand, with cities like Hanoi and Riyadh absorbing large volumes of both domestic and cross-border capital.

e) Stress in Asian EMEs: Chinas property sector remains under significant structural strain due to developer over-leverage, demographic slowdown, and policy uncertainty, exerting a drag on broader Emerging Market (EME) averages.

Outlook for FY 2026–2027

The structural divide in global housing markets is expected to persist into FY 2026–2027. Supply-constrained markets with high foreign investor appeal (Southern Europe, Japan, parts of MENA) are likely to sustain above-average growth. Advanced economies across Northern Europe and North America will likely see gradual recovery as central banks complete their rate normalisation cycles.

Chinas recovery remains the key wildcard, with stabilisation in the developer sector being a prerequisite for any meaningful price rebound in the region.

Globally, the BIS notes that since the Global Financial Crisis of 2007–09, real house prices have risen by 21% — 34% in advanced economies and 11% in emerging markets — underscoring the long-run appreciating trend despite cyclical corrections.

Disclaimer & Sources:

Data in this note is drawn from the Knight Frank Global House Price Index (Q1–Q2 2025), BIS Residential Property Price Statistics (Q1–Q2 2025), Global Property Guide Q4 2025 rankings, and Statista/OECD housing price datasets. This report is for informational purposes only and does not constitute financial or investment advice. v Indian Economy FY 2025-26

GDP Growth: Indias real GDP expanded 7.7%, up from 7.1% in FY 2024-25. Nominal GDP rose 8.9% to Rs 346.36 lakh crore.

Sectoral Performance:

Services sector grew 9.9%, led by IT, trade, transport, and communication.

Manufacturing & construction rose 7.4%, with construction alone expanding 8.4%. Agriculture moderated to 3.8% growth.

Consumption & Investment: Private consumption rose 7.5%, while investment momentum was strong with GFCF up 10.8% in Q4 FY26. Inflation: Retail inflation fell sharply to 1.7%, boosting affordability and demand.

External Sector: Current Account Deficit narrowed to 0.8% of GDP, supported by IT exports and remittances.

Indicator	FY 2024-25	FY 2025-26	Trend
Real GDP Growth	7.1%	7.7%	Accelerating
Nominal GDP (Rs lakh crore)	318.07	346.36	Rising
Services Growth	8.5%	9.9%	Strong
Construction Growth	7.2%	8.4%	Expanding
Inflation	4.6%	1.7%	Declining

v Housing Scenario FY 2025-26

Urban Housing Demand: Rising urbanization and infrastructure projects fuelled demand in Tier-1 and Tier-2 cities.

Affordable Housing: Schemes under PMAY-Urban continued to support lower- and middle-income households.

Construction Growth: The construction sector expanded 8.4%, reflecting strong housing and infrastructure activity.

Real Estate Services: Financial, real estate, and professio nal services grew 10.4%, showing resilience in housing and commercial property markets.

Financing & Affordability: Lower inflation and stable interest rates improved affordability; banks reported healthier housing loan portfolios.

Challenges: Global capital flow volatility and commodity price fluctuations may affect housing input costs. v Housing Sector FY 2025-26

Urban Housing Demand: Strong growth in Tier-1 and Tier-2 cities, driven by rising urbanization, infrastructure expansion, and affordable housing schemes under PMAY-Urban.

Construction Activity: The construction sector expanded 8.4%, reflecting robust housing and infrastructure development.

Real Estate Services: Financial, real estate, and professional services grew 10.4%, showing resilience in both residential and commercial property markets.

Financing & Affordability: Lower inflation (1.7%) and stable interest rates improved affordability.

Banks reported healthier balance sheets, supporting housing loans.

Affordable Housing Schemes: Continued government support through subsidies and incentives boosted demand among lower- and middle-income households.

Challenges: Global capital flow volatility and commodity price fluctuations may affect housing input costs, though domestic fundamentals remain strong.

Indicator	FY 2024-25	FY 2025-26	Trend
Construction Growth	7.20%	8.40%	Expanding
Real Estate Services Growth	9.10%	10.40%	Strengthening
Inflation (impacting affordability)	4.60%	1.70%	Declining

v Opportunities

Urbanization & Infrastructure Growth: Rapid urban expansion, metro connectivity, and Smart Cities projects are fuelling residential and commercial housing demand.

Affordable Housing Momentum: Continued government support through PMAY-Urban and PMAY-Rural, coupled with tax incentives, will sustain growth in the affordable segment.

Green & Sustainable Development: Increasing focus on eco-friendly materials, energy-efficient designs, and ESG compliance is attracting institutional investors.

Technological Integration: AI-based property management, digital sales platforms, and smart home automation—are transforming the housing experience

Financial Accessibility: Stable interest rates and expanding mortgage penetration are improving affordability and liquidity in the housing market.

Threats

Rising Input Costs: Volatility in prices of cement, steel, and other construction materials may compress developer margins.

Regulatory & Compliance Burden: Complex approval processes under RERA, GST, and environmental norms can delay project execution.

Global Economic Headwinds: Fluctuations in global capital flows and commodity markets could dampen investor confidence.

Land Acquisition Challenges: Legal disputes and procedural delays continue to hinder large-scale housing developments.

Climate & Environmental Risks: Increasing frequency of floods, heatwaves, and extreme weather events may raise insurance and maintenance costs.

Aspect	Opportunities	Threats
Policy Support	PMAY, Smart Cities, tax incentives	Regulatory delays, compliance burden
Market Drivers	Urbanization, digital adoption	Global slowdown, cost inflation
Sustainability	Green building, ESG focus	Climate-related risks
Financing	Low interest rates, credit expansion	Tight liquidity if inflation rises

v Product Performance

The Company had continued with strategy of going granular and focused on sourcing small ticket size loans in its vertical, spread over wider geographical area resulting into de-risking the loan portfolio, better control over delinquencies and better risk spread in the medium to long term.

v Risks and Concerns

Being in the lending business, Risk Management forms a vital element of our business. The Company has a well-defined Risk Management framework, approved by the Board of Directors. It provides the mechanism for identifying, assessing and mitigating risks.

The company has a Risk Management Committee (RMC) and an Asset Liability Management (ALM) Policy approved by the Board. The Board has constituted the Asset Liability Committee (ALCO) to assess the risk arising out of the liquidity gap and interest rate sensitivity.

During the year, the RMC reviewed the risk associated with the business, its root cause and the efficacy of the measures taken to mitigate the same. ALCO also reviewed the risks arising from the liquidity gap and interest rate sensitivity and took decisions to mitigate the risk by ensuring adequate liquidity through the maturity profile of the Companys assets and liabilities.

Internal control systems and their adequacy

Company has in place adequate internal control systems commensurate with the size and nature of its operations. Internal control systems comprising of policies and procedures and well-defined risk and control matrix are designed to ensure orderly and efficient conduct of business operations, safeguard companys assets, prevention and detection of errors and frauds, ensure strict compliance with applicable laws and assure reliability of financial statements and financial reporting.

An extensive program of internal audits and regular reviews by the Audit Committee is carried out to ensure compliance with the best practices. The efficacy of internal control systems is tested periodically by Internal Auditors and internal control over financial reporting is tested and certified by Statutory Auditors.

Human Resource Development

The company values its relationship with all employees and ensures that each of team members feel connected and shares the broader vision of making a positive social impact by bridging the credit gap. The top management relentlessly guide employee and undertakes various public-centric activities to keep employees engaged and provides them with suitable opportunities.

The Company has ensured that the employees skills are continuously uplifted so that employees can handle challenges while staying abreast with the functional domain knowledge of the Non-Banking Financial Company (NBFC) Industry. The Company focuses on providing opportunities to each employee to grow and utilize their full potential.

The Asset per Employee of the Company as at March 31, 2026 was Rs 245.59 lacs.

Gender equality among organization

In todays dynamic business environment, achieving gender equality is the factor for competitiveness and growth of any organization. To create an inclusive and dynamic economy, SHCL ensures that everyone receives an equal opportunity to succeed. Gender equality in the workplace refers to a variety of culture, practices and attitude that promotes or subverts attempts to create a gender equal workplace.

Marketing and Selling Arrangements

The Companys marketing team has taken steps to serve the customers at their door step which includes appointing Home Loan Channel Partner wherever deemed necessary. The Company also caters to walk-in customers among others.

v Loan Products

SHCLs major focus has been to provide home loans to individuals and families for purchase, construction, extension, repair and renovation of houses. The

Company has also developed loan products for the families in the self-employed category where formal income proofs are not easily available and the repayment capacity of such families are appraised based on their cash flows.

Product Portfolio

Individual Housing Loans (HL)	This is the primary home loan product available to all Indian nationals / NRIs (selectively), to acquire / construct a house anywhere in India within the jurisdiction of SHCLs Branches.
Home Improvement Loans (HIL)	This loan is extended to help the borrower meet his requirement of improvement / renovation of the existing house.
Home Extension Loan (HEL)	This loan is given to enable the individual to expand the home / construct additional space to meet the growing requirements of the family.
Land Loans (LL)	Strictly for non-agriculture land situated within approved layouts of Municipal / Development Authority limits and in accordance with regulatory guidelines in place. In other words Land, Loans can be sanctioned only in case of Plots (Selectively private plots allotted by Development Authorities and Housing Board specifically for the construction of houses/flats (residential purpose) within Municipal limits.
Home Loan Plus (HLP)	Existing Borrowers with good repayment track record are eligible to apply for this loan. Seasoning period of 6 months from the last/full disbursement of the existing loan.
Mortgage Loans (ML)	This loan is extended to those who own residential property with fixed sources of income and are looking for finances to meet immediate requirements like childrens education, marriage, medical treatment etc.
Non Residential Property Loans (NRPL)	All professionals like practising Medicos, CA/ICWA/CS, Architect, Consulting Engineer, Solicitors may be considered for this loan for acquiring / constructing their Office premises, clinic etc.
Home Loan Enhancement (HLE)	In the case of existing good borrowers whose repayment track record is consistent and regular, can enhance existing loan for extension or renovation or repairs of the property.
Loan Take Over / Balance Transfer (BT)	Existing home loan takeover from HFCs / Banks.Existing mortgage loan takeover from HFCs / Banks. Existing non residential premises loan takeover from HFCs / Banks.

v Spread on Loans

The weighted average rate of lending as on March 31, 2026, was 10.26 per cent p.a. as compared to 10.37per cent p.a. in the previous year. The average all-inclusive cost of funds was 3.72 per cent p.a. as on March, 31, 2026 against 4.58 per cent in the previous year. The spread on loans over the cost of borrowings as on March 31, 2026 was 6.54 per cent p.a. as against 5.79 per cent p.a. in the previous year.

v New Segments

The Company has been continuously analysing the housing needs and credit profile of underserved market segments. Method of gaining a deeper understanding of these market segments is under review and would enable us to enlarge our customer base. v Business Strategy

SHCLs operating environment for Housing Finance

Companies in Financial Year 2026 remains constructively balanced, with a focus on disciplined growth, prudent regulation, and digital enablement. The regulatory lens is both supportive and vigilant, offering well-governed HFCs like SHCL a clear runway to expand responsibly. SHCL is well-positioned to navigate and evolving landscape-leveraging opportunity, managing risk, and contributing meaningfully to Indias financial inclusion and affordable housing agenda. v Financial and Operational Performance

The same has been covered in the section Directors Report forming part of this Annual Report.

E Key Ratios

Particulars	2025-26	2024-25
1 CRAR (%)	136.01	127.87
2 Net Owned Fund (Rs in Lakh)	5281.05	5238.68
3 Operating Profit Margin (%) #	5.40	9.12
4 Net Profit Margin (%)	4.80	7.51
5 Return on Equity (%)	0.65	1.24
6 Leveraging of NOF (Times)	0.25	0.43

# Operating Profit= Profit before tax - Other Income

v Business Outlook (FY 2026-2027)

The Company will maintain its strategic focus on process simplification and productivity enhancement to drive sustainable business growth keeping in mind and overcoming the following factors;

Affordable Housing Demand: Strong government push through PMAY and urban housing schemes will continue to drive loan demand among low and middle-income households.

Semi-Urban Market Growth: Tier-2 and Tier-3 cities present expansion opportunities, where small NBFCs can leverage local networks and flexible lending models.

Funding Challenges: Access to low-cost capital remains limited compared to banks and large HFCs, impacting competitiveness.

Regulatory Oversight: Stricter RBI norms on capital adequacy and compliance may increase operational costs.

Asset Quality Risks: Exposure to informal income borrower s could elevate default risks if macroeconomic conditions weaken.

We are committed to delivering faster, simplified home loan solutions and will continue to practice disciplined portfolio management with geographic diversification as a key principle-ensuring that loans are distributed evenly across all the existing branches. This measured approach reduces concentration risk and enhances portfolio resilience.

Amidst this, SHCLs purpose remains to further strengthen the governments vision of Housing for all and contribute to nation building in its humble way.

v Indian Accounting Standards (Ind AS)

The Company has prepared these financials to comply in all material respect with the Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013, as amended, relevant provisions of the Companies Act 2013, various regulatory guidelines to the extent relevant and applicable to the Company and in accordance with the generally accepted accounting principles in India.

The financial statements are presented in Indian Rupees (Rs) and all values are rounded to the nearest Crore except when otherwise stated.

v Compliance

The Compliance for small housing finance companies, regulatory compliance is becoming more stringent, especially in capital adequacy and fair practices. Aligning with RBIs updated frameworks will be critical to maintaining credibility, accessing funding, and sustaining growth in FY 2026–27.

RBI Regulatory Framework Updates for HFCs

1. Master Direction 2025

Comprehensive guidelines covering registration, capital adequacy, asset classification, provisioning, governance, and reporting.

Aligns HFCs with the scale-based regulation framework applicable to NBFCs.

2. Amendment Directions 2026

Clarifies computation of Owned Fund (equity, reserves, convertible preference shares, quarterly profits).

Excludes revaluation reserves and intangible assets, ensuring stricter capital adequacy compliance.

3. Second Amendment Directions 2026

Effective January 1, 2027.

Revises the Fair Practices Code for HFCs, mandating ethical advertising, marketing, and sales conduct.

Requires compliance with Responsible Business Conduct Directions, 2025 (already applicable to NBFCs).

Area	Key Requirements
Capital Adequacy	Owned Fund computation, quarterly profit inclusion
Asset Quality	Prudential norms on classification & provisioning
Governance	Strong board oversight, auditor accountability
Fair Practices	Ethical marketing, transparent disclosures
Reporting	Enhanced compliance and disclosure standards

The small housing finance companies, regulatory compliance is tightening. Success in FY 2026–27 will depend on robust capital management, transparent customer practices, and alignment with RBIs evolving frameworks. This ensures credibility, funding access, and sustainable growth.

Cautionary Statement

The information and statements contained in this Management Discussion & Analysis Report are based on current expectations, estimates, projections, and assumptions regarding the housing finance sector, economic conditions, government policies, and regulatory environment. Certain statements may be forward-looking in nature and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied.

Factors such as changes in interest rates, regulatory developments, economic conditions, competition, and credit risk may significantly impact the companys performance. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

This report should be read in conjunction with the companys audited financial statements and notes thereto, which provide a more comprehensive view of its financial position and performance.