Zandu Realty Ltd Merged Management Discussions

Industry Structure and Developments

The year 2016-17 has been transformative and disruptive for the Real Estate sector. This year the sector has witnessed major policy changes in the form of implementation of The Real Estate (Regulation & Development) Act, 2016 where 69 out of 92 sections of the Act were notified on 26th April, 2016 which came into force from 1st May 2016 and remaining 23 sections were notified on 19th April, 2017 which came into force from 1st May, 2017. Secondly, GST enactment will also usher some benefits to the Developer as well as the buyers.

In the wake of the setback suffered due to demonetization of Indian currency notes of INR 500 and INR1000 announced by the Union Government in November 2016, the Finance Minister in his budget speech has made some key announcements in an attempt to address the challenges in the real estate sector, through the proposals announced in the Union Budget 2017-18, with focus on providing thrust to affordable housing and infrastructure. Some of the key announcements made for real estate and construction include:

• granting an infrastructure status to affordable housing projects, which has been a long standing demand of the supply side stakeholders;

• highest ever allocation to the infrastructure development (INR 3.96 Lakh Crore)

• relaxation in area requirements and time period for the completion of a project;

• reduction in holding period to 24 months from 36 months for long-term capital gains tax on immovable properties.

These announcements would benefit the government in achieving the vision of Housing for All by 2022 and improve urban as well as rural infrastructure by attracting higher involvement from private sector developers and domestic as well as foreign investors.

The announcements made in the Union Budget, coupled with policy reforms undertaken such as RERA and GST Law earlier this fiscal are expected to lead to higher investments in the sector, especially in the affordable housing segment.

Opportunities

Various initiatives are being taken by the government for the growth of this industry. Currently, the residential property market is dominated by end-users - speculative investors are making a beeline out of real estate as an investment -

category. Residential demand is expected to pick up only towards the end of 2017 but the recovery will be sustainable and based on much sounder market fundamentals than transient sentiment.

Technologies are being used for the promotion of low cost and affordable housing construction development in residential segment.

Threats and Challenges

Multiple approval authorities and processes lead to project delays during various stages. Simplifying the approval process will lead to fewer time and cost overruns and better products and services for customers. The construction processes in India are highly labour-intensive. Low cost/ affordable housing concept is fully dependable on new technologies to make it cost effective and any delay therein will be a challenge for growth.

Discussion on Financial Performance with respect to Operational Performance and Outlook

In respect of Companys Project, "Zandu Sigma Estate" at Dadar, Mumbai, the Company has received Occupancy Certificate ("OC") from Municipal Corporation of Greater Mumbai for Building IB. With this, construction of the Project is complete, save and except that OC for 2 units in Building 2 is still to be obtained. The Company has been able to sell substantial number of Units in the Project.

As reported in the previous Annual Reports, the Company is still exploring opportunities to harness the resources of the Company in a meaningful and risk free manner.

Risks and Concerns

The real estate sector in India has traditionally been an unorganised sector of the economy. However, over the past few years, the sector has received a lot of attention from the government leading to increased regulatory norms. As a result, it has metamorphosed from being largely fragmented and unorganised to a structured and organised one like its

peers in developed economies. This real estate market is inherently a cyclical market and is affected by macroeconomic conditions, risk related to fluctuating input, changes in applicable governmental schemes, reforms, policies, changes in supply and demand for projects, availability of consumer financing and liquidity, availability of labour and the skill of the employees. However, your Company has taken necessary steps to tackle these risks appropriately.

Internal Control Systems and their Adequacy

Our internal control systems are adequate and provide, among other things, reasonable assurance of recording transactions of operations in all material respects and of providing protection against misuse or losses from unauthorized use or disposition.

Human Resource and Industrial Relation

Your Companys business is managed by a team of competent and passionate leaders, capable of enhancing your Companys standing in the sector.

Cautionary Statement

The Management Discussion and Analysis Report may contain certain statements that might be considered forward looking. These statements are subject to certain risks and uncertainties. Actual results may differ materially from these expressed in the statements as external factors like Government policies, political and economic development, risk inherent to the sector could influence the Companys operations.