Unitech Ltd Management Discussions

A. Global Economy

1. In 2023, the global economy faced a complex scenario which was characterized by persistent inflation, geopolitical tensions including the Russia-Ukraine conflict, tightening monetary policies, and ongoing pandemic repercussions, all contributing to a decline in growth. According to the World Economic Output (WEO) update, global growth slowed from 3.5% in CY 2022 to 3.0% in CY 2023. Despite various challenges such as supply chain disruptions and inflation driven factors, major economies received support from fiscal stimulus, monetary policies, trade agreements, international aid, green initiatives, and technological investments.

2. The baseline forecast for the world economy is to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025 — will be offset by a modest slowdown in emerging markets and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now, at 3.1 percent, is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies. Core inflation is generally projected to decline more gradually (Source: IMF).

3. The risks to global economic growth are balanced, with potential upside from quicker disinflation, slower withdrawal of fiscal support measures, and advancements in supply-side reforms. Conversely, downside risks include spikes in commodity prices due to geopolitical or weather-related disruptions, ongoing core inflation necessitating tighter monetary policies, potential slowdowns in Chinese growth, and potential disruptions from abrupt fiscal consolidations.

B. Overview of the Indian Economy

1. India is one of the fastest growing economies of the world and is poised to continue on this path, with aspirations to reach high middle-income status by 2047, the centenary of Indian independence. It is also committed to ensuring that its continued growth path is equipped to deal with the challenges of climate change, and in line with its goal of achieving net-zero emissions by 2070.

2. After real GDP contracted in FY 2020-21 due to the COVID-19 pandemic, growth bounced back in FY 202122, supported by accommodative monetary and fiscal

policies and wide vaccine coverage. Consequently, India emerged as one of the fastest growing economies in the world in 2022, despite significant challenges in the global environment - including renewed disruptions of supply lines following the rise in geopolitical tensions, the synchronized tightening of global monetary policies, and inflationary pressures.

3. Strong economic growth in the first quarter of FY 2023-24 India overtake the UKs ecomony to become the fifth-largest economy after it recovered from the COVID-19 pandemic shock. Nominal GDP or GDP at Current Prices in the year 2023-24 is estimated at Rs. 293.90 lakh Crores (US$ 3.52 trillion), against the First Revised Estimates (FRE) of GDP for the year 2022-23 of Rs. 269.50 lakh crores (US$ 3.23 trillion). The growth in nominal GDP during 2023-24 is estimated at 9.1% as compared to 14.2% in 2022-23. Strong domestic demand for consumption and investment, along with Governments continued emphasis on capital expenditure are seen as among the key drivers of the GDP in the first half of FY 24.

4. During the period January-March 2024, Indias exports stood at US$ 119.10 billion, with Engineering Goods (25.01%), Petroleum Products (17.88%) and Organic and Inorganic Chemicals (7.65%) being the top three exported commodity. Rising employment and increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months.

5. For FY 2024-25, growth, while still healthy, may see a moderation due to high interest rates and lower fiscal impulse which may temper demand and the net tax impact would normalize. Also, the uneven economic growth of some trading partners and escalation of geopolitical uncertainties can drag down exports.

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

7. Future capital spending of the government in the economy is expected to be supported by factors such as tax buoyancy, the streamlined tax system with low rates, a thorough assessment and rationalization of

the tariff structure, and the digitization of tax filing. In the medium run, increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers. The contact-based services sector has demonstrated promise to boost growth by unleashing the pent-up demand. The sectors success is being captured by a number of HFIs (High-Frequency Indicators) that are performing well, indicating the beginnings of a comeback.

8. India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. India is primarily a domestic demand- driven economy, with consumption and investments contributing to 70% of the economic activity. With an improvement in the economic scenario and the Indian economy recovering from the Covid-19 pandemic shock, several investments and developments have been made across various sectors of the economy.

C. Real Estate Industry Structure and Development

1. The real estate sector is one of the globally most recognized sectors. It comprises of four sub-sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodation. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

2. In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It is also expected that this sector will incur some NonResident Indian (NRI) investment, both in the short term and the long term. Bengaluru is expected to be the most favored property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

3. Indias real estate market is one of the most dynamic and fastest-growing in the world. While it has witnessed rapid growth in recent years, the unforeseen problems posed by the pandemic during the period 2020-22 brought about radical change in the sector, and ushered several challenges. However, it has made a fairly quick recovery in comparison to other real estate markets in the world, with demand gaining momentum.

4. According to a recent industry report, there will be $1 trillion of real estate sales in India by 2030, contributing 13 per cent to the gross domestic product (GDP) by 2025. Some of the reasons attributable to the same are given below:

(i) Urbanization in full swing

As more and more people are relocating to metropolitan regions in search of employment and better opportunities in India, this trend is anticipated to continue in the upcoming years.

(ii) Rapid growth of the middle class

Indias middle class is rapidly growing, with an increasing number of people having enough money to buy properties. As a result, housing demand is increasing, especially in the low and moderate-price categories.

(iii) Infrastructure push

Infrastructure development has been significantly funded by the government, which has made it simpler for people to live and work in cities. Due to peoples increased willingness to purchase homes in locations with strong infrastructure, this is also increasing demand for real estate.

(iv) Foreign Investments

India is becoming a more popular real estate investment destination for foreign investors. This has been brought on by various factors, such as the nations robust economic growth, increasing disposable incomes, and a favorable investment environment.

(v) Government Support

To stimulate the real estate market, the government has offered various incentives, including tax reductions and subsidies for homebuyers. This has contributed to improving the ecosystem for real estate investment.

(vi) Integrated lifestyle

The idea of integrated living is quickly taking on in the residential sector as home buyers have begun to favor developments with state-of-the- art amenities, including office buildings, parks, schools, hospitals, and shopping centers with multiplexes. The demand for township living is increasing positively and is certain to continue further.

(vii) Real Estate as potential investment

Homeownership as a long-term investment strategy is more appealing than ever. There was a spike in second-home purchases in 2021. People began to understand the advantages of real estate investing and began to view it as a solid and safe form of investment. This year is likely to see a

multi-fold growth in real estate investments since the real estate market is less volatile than other investment markets and delivers higher returns.

D. Developments

1. Indian real estate sector has witnessed high growth in the recent times. The Private Equity Investments in Indias real estate sector stood at US$ 4.2 billion in 2023. The Private Equity Investments in Indias real estate sector, stood at US$ 3.4 billion in 2022.

2. Exports from SEZs reached US$ 157.2 billion in FY 23 and grew ~28% from US$ 133 billion in FY 22.

3. In July 2021, the Securities and Exchange Board of India lowered the minimum application value for Real Estate Investment Trusts from Rs. 50,000 (US$ 685.28) to Rs. 10,000-15,000 (US$ 137.06 - US$ 205.59) to make the market more accessible to small and retail investors.

4. Construction is the third-largest sector in terms of FDI inflows. FDI in the sector (including construction development & activities) stood at US$ 58.5 billion from April 2000-September 2023.

5. Some of the major investments and developments in this sector are as follows:

(i) Foreign investors pump around US$ 4 billion yearly into Indian real estate, with a 20% YoY increase in foreign inflows in 2023.

(ii) In 2023, luxury home sales in India priced at Rs. 4 crore (US$ 481,927) and surged by 75%, doubling their share in total housing sales.

(iii) In Indias top eight cities, housing prices rose 7% year-on-year due to strong housing demand supported by persistent purchaser demand and steady borrowing rates.

(iv) The Indian real estate sector witnessed strong private equity (PE) investments of US$ 1.92 billion in second quarter of 2023, demonstrating investor confidence in the market. According to the most recent Investment report from Cushman & Wakefield, this was 63% higher than the previous quarter (first quarter of 2023) and 60% higher than the same time last year.

(v) In July 2023, Delhi-NCR emerged as the third biggest destination in the Asia Pacific in having flexible office space stock beating Beijing and Seoul, while Bengaluru retained the top spot, according to real estate consultant CBRE.

(vi) Sales in the luxury residential market scaled by 151% year-on-year (y-o-y) in the quarter from January-March 2023.

(vii) Housing sales in top seven Indian cities stood at 1.14 lakh units in first quarter of 2023, an increase of over 99,500 units compared to the same period of 2022.

E. Government Initiatives

1. Government of India, along with the governments

of respective States, has taken several initiatives to encourage development in the sector. The Smart City Project, with a plan to build 100 smart cities, is a prime opportunity for real estate companies. Below are some of the other major Government initiatives:

(i) In the 2024-25 interim Budget, Finance Minister announced a boost for Indias affordable housing sector by adding 2 crores more houses to the flagship scheme PMAY-U.

(ii) In the Union Budget 2023-24, the Finance Ministry announced a commitment of Rs. 79,000 crore (US$ 9.64 billion) for PM Awas Yojana, which represents a 66% increase compared to last year.

(iii) Under Union Budget 2021-22, tax deduction up to Rs. 1.5 lakh (US$ 2,069.89) on interest on housing loan, and tax holiday for affordable housing projects have been extended until the end of fiscal 2021-22.

(iv) The Atmanirbhar Bharat 3.0 package announced by the Finance Minister in November 2020 included income tax relief measures for real estate developers and homebuyers for primary purchase/sale of residential units of value up to Rs. 2 crore (US$ 271,450.60) from November 12, 2020, to June 30, 2021.

(v) In order to revive around 1,600 stalled housing projects across top cities in the country, the Union Cabinet approved the setting up of a Rs. 25,000 crore (US$ 3.58 billion) alternative investment fund (AIF).

(vi) Government created an Affordable Housing Fund (AHF) in the National Housing Bank (NHB) with an initial corpus of Rs. 10,000 crore (US$ 1.43 billion) using priority sector lending short fall of banks/ financial institutions for micro financing of the HFCs.

(vii) As of December 31, 2022, India had formally approved 425 SEZs, and as of January 2023, 270 SEZs are operational. Most special economic zones (SEZs) are in the IT/ BPM sector.

F. Industry Review

1. The post pandemic picture for the real estate sector is a paradigm shift from the past. The pandemic brought

to light the importance of home ownership and the attitude of customers towards residential properties has also witnessed a substantial shift. The Indian Real Estate industry did very well in 2022. The year can be easily termed as the "turn-around year" for segments such as residential and retail, with all segments recovering from COVID-lows and recording strong year-on-year growth. While growth in India has slowed for multinational corporations, domestic demand has continued to remain steady.

2. Indias real estate market is expected to exhibit a growth rate (CAGR) of 9.2% during 2023-2028. Therefore, FY 2024-25 is expected to see a strong foundation as there will be more buyers, and home loan rates will be lower. Multiple rating agencies and the Economic Survey are indicative of a growth of 6 to 7%, which will ultimately drive the growth in the real estate market. This growth can be attributed to increasing business activity, improved job markets, and higher income levels, all of which will inevitably lead to a rise in real estate demand.

3. Along with important policy initiatives such as "Housing for All" and the Pradhan Mantri Awas Yojana, the government has been developing and constructing infrastructure mega-projects like highways, new airports, metros, etc. These factors will stimulate both the quantitative and qualitative growth of real estate holdings. Intriguingly, real estate in Tier 2 and Tier 3 markets will also grow rapidly, generating substantial returns for investors.

4. Tiers 2 and 3 cities are rapidly establishing themselves as real estate hubs where a thriving housing market continues to support the overall infrastructure construction. As we go along, these cities may be competitive with metropolitan areas and offer a variety of residential and commercial investment opportunities. The majority of demand is expected to continue to for housing, primarily ready-to-move-in. While rising interest rates are a cause for concern, the desire for larger, more luxurious homes is also likely to see a surge. The popularity of WFH and hybrid working arrangements has increased the demand for vacation houses. We anticipate that these trends will continue in 2024-25.

5. While the residential segment witnessed strong performance, commercial office sector continues to remain sluggish with demand not yet reaching the pre-pandemic levels. The main challenge to office space demand has been the work from home trend and slowdown in global economic growth. The global slowdown directly impacts sectors like IT/ ITeS, which is the major occupier of office space in India.

6. Retail real estate sector though, is back to full swing with consumption recovering beyond pre-pandemic levels and should continue the momentum.

G. Opportunities and Challenges

1. Opportunities

(i) Post pandemic, there has been a steep rise in housing demand with renewed interest and perspective of the homebuyers toward real estate. The pandemic has nudged a lot of fence- sitters to convert into first-time home buyers and the existing ones to upgrade to larger homes thus resulting in rising housing demand across segments. Key influencing elements comprising rising population, wealth growth and rapid urbanization are the key contributors to this growth. Hybrid working models will also continue to further drive the demand for larger homes. Employers are expected to continue to offer flexibility to their employees in order to attract and retain talent.

(ii) Reports indicate a steady upward trend, with stable interest rates and escalating property prices driving demand, particularly in the residential segment. The governments Housing for All initiative exemplifies its commitment to accessibility and stability, aiming to address the housing deficit while stimulating economic activity through construction projects. Moreover, sustainability measures like the Green Rating for Integrated Habitat Assessment (GRIHA) signify a shift towards eco-friendly practices, aligning the industry with global trends and consumer preferences.

(iii) The Indian real estate sector, characterized by its highly fragmented nature, has been undergoing a significant consolidation phase for several years. This consolidation has been accelerated by various factors, including the pandemic, which has effectively sidelined less robust participants. The current environment in the real estate industry poses challenges to the entry of new competitors leaning towards a smaller number of dominant developers in each region, this period of consolidation offers an attractive chance for current real estate firms to meet the increasing demand for housing.

(iv) Digital marketing has become a key strategy for real estate developers to boost sales and connect with customers. Since the pandemic, their marketing efforts have expanded beyond attracting new customers and building brand awareness to include creating personal connections digitally. Thanks to technology that allows property purchases online, developers have seen strong sales, even during lockdown periods. Theyre using digital tools to engage with potential buyers, present project details, offer virtual tours, and target Non-Resident Indians (NRIs) to increase sales. Advanced technologies like virtual reality, augmented reality, and AI- driven chatbots are increasingly employed to offer tailored services to potential clients. Moving forward, developers will need to keep up with technological advancements, as the share of real estate transactions conducted online is expected to grow.

(v) The rise of dollar against Indian rupee along with favorable investment opportunities has also drawn the interest of NRIs towards Indian real estate.

(vi) Affordable housing continues to remain a significant opportunity for developers and key focus area of the government. This segment could see a meaningful uptick in demand with an expected economic recovery and rising income levels.

(vii) Increased role of RERAs set up in various states creates a very dependable purchase market with sidelining/ curbing of fly-by-night operators in the real estate sector.

2. Threats and Challenges

(i) The Indian real estate market is going through a transformational phase. From witnessing the after-effects of COVID-19 to the emergence of new technologies to the heightened concern of a global recession, the industry is going through a lot.

(ii) Real estate sector is a regulated sector and any unfavorable changes in government policies and the regulatory environment can adversely impact the performance of the sector. There are substantial procedural delays with regard to land acquisition, land use, project launches and construction related approvals.

(iii) The time-taking nature of construction necessitates the need of funding for new small- scale developers. But developers have always faced difficulties in availing funds from banks and financial institutions. Decisions are framed on the basis of speculative cash flows. As a result, the financial institutions typically exercise great care and consume a lot of time while reviewing loan applications. Due to non-availability of funding and insufficient finance, many realtors actually fail to execute projects on time.

(iv) The construction sector is also heavily dependent on manual labour. During the Coronavirus pandemic, the sector was badly hit due to labor availability issues, which severely affected the project completion timelines. This emphasizes the need for development of technologically less labor-intensive alternative methods of construction.

(v) Further, there has been a steep increase in the cost of construction materials, including the cost of essential materials like cement and steel. The global shortage of raw materials is the main factor contributing to the price increase. Moreover, rising fuel costs have driven up the logistics costs, pushing up the entire cost of the materials and as a result the real estate.

H. Unitech Specific

I. The Unitech Group has to be recognized as an exception in view of the peculiar facts and circumstances. The Group got into financial constraints and/or mismanagement, as has been alleged, sometime from 2013-2014 onwards, which resulted in non-delivery of sold units to the Homebuyers. This followed litigation at various fora and the promoters were lodged in jail in 2017. Finally, the Honble Supreme Court intervened, which led to supersession of the erstwhile management, replaced by an independent Board of Directors in January 2020. The new management has been facing a plethora of challenges on various fronts. However, it has been working under the guidance and supervision of the Honble Supreme Court.

2. Taking a leaf from the directions of the Honble Supreme Court, the new management has taken up the construction and completion of various residential and commercial projects as its first priority. It has made plans for commencement of construction on 74 residential and 12 commercial projects, completion of which would facilitate delivery of completed units to more than 17,000 homebuyers. The Honble Supreme Court, vide its order dated 18.05.2022, appointed Justice (Retd.) A. M. Sapre to be associated with every stage of tendering process to be carried out under his supervision. Based on the ground-work done by PMCs, it was estimated that about 130 to 135 Tenders would be required to be floated for completion of all the 74 residential and 12 commercial projects. Since, it was practically neither feasible nor advisable to float all the 130 tenders in one go, the Management decided to float these 130 odd tenders in four to five Lots with each Lot comprising about 30-35 tenders. As the Members are already aware, the Unitech Management after seeking the approval of the BoD and Justice (Retd.) A.M. Sapre in the month of December 2022, floated a total of 35 Tenders as part of Lot-1 on 02.01.2023. There was poor response from the contractor community as no bids were received against 18 Tenders. After the completion of Bid Management process and approval of BoD and Justice Sapre, a total of 15 Tenders were submitted to the Honble Supreme Court in April 2023, seeking approval for award of Contracts. Further, after the approval of BoD and Justice (Retd.) A.M. Sapre, the Management floated a total of 51 Tenders as part of Lot-2 on its website on 08.05.2023 and 09.05.2023. After the completion of Bid Management Process for Lot-2 Tenders, a total of 34 Tenders were approved by the BoD and Justice Sapre on 18.08.2023, and the same were submitted in the Honble Supreme Court for seeking its approval for awarding the Contracts to successful Bidders. The Honble Supreme Court permitted the Unitech Management to award contracts in respect of 49 (15+34) Tenders of Lot-1 & Lot-2 on

03.11.2023. In furtherance to the aforesaid order dated

03.11.2023, the Management uploaded the list of 49 Tenders at the Companys website on 04.11.2023 and further issued Letters of Intent (LoIs) to all the 23 Contractors to whom 49 Tenders of 39 Projects were awarded to fulfill the requisite formalities for signing of the Contract Agreements. Simultaneously, after seeking the approval of the BoD in its meeting held on 26.10.2023, the company floated 55 Tenders as part of Lot-3 on 07.11.2023/ 08.11.2023. After the completion of Bid Management Process for Lot-3 Tenders, BoD and Justice Sapre approved a total of 38 Tenders on 16.02.2024 and the same were submitted in the Honble Supreme Court for its approval for awarding the Contracts to successful Bidders. After the permission granted by Honble Supreme Court vide its order dated 26.04.2024, a total of 38 Tenders were awarded to successful bidders.

3. Separately, keeping in view that the works on various structures of buildings, left incomplete by the erstwhile management, had been lying stalled for a number of years, it was decided to get Health Safety Audit of all these buildings carried out from institutes of eminence. The Honble Supreme Court was also apprised about the same through Action Taken Report - III. Services of IIT Roorkee were availed for this purpose for all the under-construction buildings within NCR area, IIT Madras for the projects at Bangalore and Chennai, and Jadhavpur University for Kolkata based projects. In the process, the Heath Safety Audit and proof-checking of structure designs of a total of 179 buildings and 13 basements were carried out. While the buildings have been found largely safe, the experts have pointed

out the need for carrying out Retrofitting works to address the deficiencies observed during these tests. Accordingly, a total of 28 Tenders were floated for the Retrofitting Works along with the general Lot-3 Tenders. Contracts have been awarded in case of 25 Tenders pursuant to the approval of the BoD, Justice Sapre and the Honble Supreme Court. The left over 07 Tenders have also been invited and the same are under process of technical and financial evaluation. Reports of the concerned institutes have also been uploaded on the Companys website.

4. Funds for completion of these projects are to be arranged from the balance receivables from the Homebuyers and proceeds from sale of unsold inventories.

I. Financial Performance (on Consolidated basis)

(Rs. in Crore)

Particulars	FY 2023-24	FY 2022-23
Revenue from operations including other income	515.43	491.96
Profit/ (Loss) before Tax	(3822.93)	(3113.76)
Profit/ (Loss) after Tax	(3807.29)	(3103.29)

J. Internal Control Systems and their adequacy

The Board of Directors has been reviewing the sufficiency of existing internal control systems and assessing the need to bring better financial control measures, which are commensurate with the size of the business of the Company.

K. Human Resources and Industrial Relations

The Company believes in attracting, nurturing and retaining a qualitative workforce to accomplish its objectives. The Company provides professional and conducive environment at work place and maintains healthy relations with its employees. The total number of employees, including contractual employees, on the rolls of the Company as on 31.03.2024 was 195.

L. Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including:

(i) Debtors Turnover

(ii) Inventory Turnover

(iii) Interest Coverage Ratio

(iv) Current Ratio

(v) Debt Equity Ratio

(vi) Operating Profit Margin (%)

(vii) Net Profit Margin (%) or sector-specific equivalent ratios, as applicable.

The Annual Report (Note No. 40 of Notes to the Standalone Financial Statements) has details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios as applicable, along with detailed explanations thereof, including (i) Debtors Turnover,

(ii) Inventory Turnover, (iii) Interest Coverage Ratio, (iv) Current Ratio, (v) Debt Equity Ratio, (vi) Operating Profit Margin (%), and (vii) Net Profit Margin (%).

M. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

Details of changes in Return on Net Worth as compared to the immediately preceeding financial year along with a detailed explanation thereof is also part of the Annual Report (Note No. 40 of Notes to the Standalone Financial Statements).

N. Outlook

FY 2023-24 has been an encouraging year for the real estate sector. Post-pandemic, developers have moved

away from the traditional way of doing business and focused on end-user customer demand with a strong focus on innovation and digital transformation. We believe that FY 2024-25 will continue with the healthy sales momentum backed by solid structural foundation, sustained demand and relatively affordable albeit somewhat higher housing loan rates.

O. Cautionary statement

Statement in this "Management Discussion and Analysis" describing the Companys objectives, projections, estimates and expectations may be a forward-looking statement within the meaning of applicable laws and regulations. Actuals might differ materially from those expressed or implied. Important Developments that could affect the Companys operations include any downtrends in the real estate sector, significant changes in political and economic environment in India or key financial markets in India and abroad, tax laws, litigations, labor relations, exchange rate fluctuations, interest and other costs, among others.