FORWAD LOOKING AND CAUTIONARY STATEMENTS
The statements in this report describing the Companys objectives, estimations,
expectations or projections, outlook etc., may constitute forward looking statements
within the meaning of the applicable Rules. Lam and Regulations. Actual results may vary
from such expectations, projections etc., whether express or implied. These statements arc
based on certain assumptions and expectations of future events over which the Company has
no direct control.
REAL ESTATE MARKET
INDIAN REAL ESTATE MARKET
There has been a series of radical and transformational reforms such as demonetization.
Real Estate Regulation 6c Development Act (RERA), FD1 relaxations, GST, Benami
Transactions (Prohibition) Amendment Act. Change in Accounting standards, all coming in a
row and in quick succession. This will increase the transparency of Indian real estate
transactions, making it more credible and attractive with only organized players on the
ground Home ownership being a priority ambition and investment objective for Indians,
these reforms will have positive implications for home buyers.
The demand for homes lias stabilized at a new low and is attracting only end users and
investors arc staying away from the market. The cycle time for purchase decisioas lias
become long.
Real Estate Regulation & Development Act (RERA) came into effect and in the state
of Karnataka with notification dated 10th July. 2017. 1his law will enforce unprecedented
transparency and accountability requirements for developers and will increase the
confidence of the consumers. The Goods and Service Tax (GST) and Benami Transactions
(Prohibition) Amendment Act will also have a major impact on the operations of the real
estate developers.
Ministry of Housing and Urban Poverty Alleviation (MoHUPA) has introduced in June 2015,
an interest subsidy scheme called Credit Linked Subsidy Scheme (CLSS) under Pradhan Mantri
Awns Yojana (URBAN)*Housing for All, for purrhase/construction/extcnsion/improvement of
house to cater Economical Weaker Section (EWS)/Lower Income Group (LIG)/Middle Income
Group (MIG), given the projected growth of urbanization 6c the consequent housing demands
in India. The qualifying criteria for affordable housing have been relaxed. This
effectively increases the size of affordable housing market across India. These segments
saw several now launches and were marketed under the buzzword of "smart",
"millennial", "efficient" homes.
Sectors such os IT and ITeS, retail, consulting and e-commcrce have registered high
demand for office space in recent times. The office space absorption in 2016 across the
top eight cities amounted to 29 million square feet (msf) with Bengaluru recording the
highest net absorption during the year. Information Technology and Business Process
Management sector led the total leasing table with 52 per cent of total space uptake in
2016. Mumbai is the best city in India for commercial real estate investment, with returns
of 12-19 per cent likely in the next five years, followed by Bengaluru and Delhi-National
Capital Region (NCR).
BENGALURU REAL ESTATE MARKET
Bengaluru is proving to be a shining spot for the real estate industry. It lias
witnessed phenomenal migration in last few decades to become the Silicon Valley of India
with a 40% share of IT industry. Due to good market drivers - IT/ITes sector - which
ensures strong macro-economic dynamics, most home buyers find Bengaluru a perfect place to
settle and retire. There has been a significant decline in the absorption, however
Bengaluru has been affected to a lesser extent os compared to the other cities in India.
The average yield rental yields are comparatively better ranging between 2-4% as compared
to cities like Mumbai where yields are in range of 1-3%. For investors looking for less
volatile market in a long term. Bengaluru provides an attractive investment option.
OPPORTUNITIES AND THREATS
Opportunities in all segments of real estate development are driven by the
macroeconomic forces on account of the unique current situation where a large part of the
population consists of people less than 24 years of age, that is people who arc young and
productive. The benefits to the economy, commonly termed as the demographic dividend is
benefiting the real estate sector. The other macroeconomic force is the rapid rate of
urbanization on account of migration of population to cities, the growth centers.
Implementation of Real Estate Regulation and Development Act (RERA) will bring in more
transparency to the real estate transactions and boost buyers confidence. The disposable
income lias been steadily Increasing and there is easier availability of consumer finance
coupled with a declining interest rate trend. All the aforesaid aspects result in
opportunities in all segments of real estate.
The key threats to real estate business emanate from the cyclicality of the business
owing to the tide and ebb in consumer and business confidence. Going forward, with the
e-commcrce market in India making itself liok attractive, can pose a serious threat to
the retail real estate. Other immediate challenges to the business are from environmental
risks such as depletion of water table potential impact of global slowdown on the
Bengaluru 1T/ITHS industry increase in cost of commodities and building materials increase
in interest rates which could result in depressed demand from customers and at the same
time increase our interest burden shortage of labour and skilled technical manpower and
the consequent upward pressure on cost of human resources regulatory and policy changes
results in higher costs and delays in approvals related with projects
SEGMENT WISE PERFORMANCE
The Company has mainly one reportable business segment Hence no further disclosure is
required under Accounting Standard (AS) 17 on Segment Reporting.
OUTLOOK
The real estate and construction sectors play a crucial role in lire overall
development of Indias core infrastructure. The real estate industrys growth is linked to
developments in various other sectors of the economy.
A stable Government at the Centre and a strong leadership will improve sentiments and
lead to economic reforms, which will augur well for the real estate industry.
The winds of change are now blowing more perceptibly. Inflation, including the house
price component, has now been reduced to the lowest level in recallable history. Property
buyers are back in force in most cities as enquiries have rebounded, and developers are
coming in with the kind of supply that is relevant to demand.
RISKS AND CONCERNS
The Companys ability to foresee and manage business risks is crucial in adiieving
favourable results. While the management of the company is positive about companys long
term outlook, wc are subject to few risks and uncertainties as given below
• Market price fluctuation
Hie performance of tire company may be affected by the sales at a price which are
driven by prevailing market conditions, the nature and location of the projects.
• Price risk of the inputs
The primary building materials like steel and cement are subject to price volatility
due to general economic conditions, competition, production levels, transportation costs
and domestic and import duties and any adverse impact of rise in input cost will have
impact on the profitability of the Company.
• Development risk
Development depends on several factors which include receipt of required approvals,
weather conditions, labour availability, material shortages etc. and any of these factors
may have an adverse impact on execution.
• r.rnnnmic risk
Any adverse change in any macro-economic variables like GDP growth, interest rates,
inflation, changes in tax, trade, fiscal and monetary policies etc. may adversely impact
the Companys business, profitability and financial condition.
• Health and safety risks
Real estate Companies constantly face the risk of injury or illness to the Companys or
third parties construction workers.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Company has proper and adequate system of internal control procedure commensurate
with its size and nature of the business so as to ensure that all assets are safeguarded
from loss, damage or disposition and ensure that all transactions are authorized, recorded
and reported correctly and adequately. All operations parameters are periodically
monitored and strengthened. The Company continuously upgrades these systems in line with
best accounting practices. The Audit Committee of the Board of Directors reviews the
effectiveness of internal controls and suggests improvements for strengthening them
whenever required.
FINANCIAL PERFORMANCE
During the year under review, tlu? Company earned a profit before tax of of Rs. 80
Lakhs and at the outset the management would like to convey gratitude to the Shareholders
for having trust and confidence in the Company and being continuously supporting the
Company.
DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS FRONT
Employees an? the key to achieve the Companys objectives and strategies. The Company
provides to the employees a fair and equitable work environment and support with a view to
develop their capabilities leaving them with the freedom to act and to take
responsibilities for the tasks assigned. The Company strongly believes that its team of
capable am! committed manpower, which is its core strength, is the key factor behind its
achievements, success and future growth.
We are continuously working to create and nurture an organization that is highly
motivated, result oriented and adaptable to the changing business environment The
industrial relations remained cordial during the year.
For, Sri Krishna Constructions (India) Limited,
Mr. Kailash Dmrcricfra Dubai
Chairman and Managing Director
DIN: 01771805.
+91-9892691696
