MANAGEMENT DISCUSSION AND ANALYSIS (MD&A)

GLOBAL ECONOMY:

The global economy struggled to gain momentum as many high income countries continued to struggle and emerging economies were less dynamic than in the past. Global growth picked up marginally in 2015 from 2014. Among the major advanced economies, growth in the United States rebounded ahead of expectations in 2015 on account of low inflation and a decline in unemployment and oil prices. In the Euro area, growth in 2014 was weaker than expected on account of low investment and inflation. Sizable uncertainty about oil prices has added a new risk dimension to the global growth outlook. On the upside, the boost to global demand from lower oil prices could be greater than is currently factored into projections.

INDIAN ECONOMY:

India's economic growth is expected to pick up in the current fiscal and will be "much better" in 2015-16. The last two years witnessed an economic slowdown. This year may be somewhat better, and next year will be much better. Indian economy was growing at over 9 per cent for three years before it was impacted by the global financial crisis of 2008. The growth rate fell to sub-5 per cent in the last two consecutive fiscals — 2013-14 and 2014-15. In the first half of the current fiscal, it improved to 5.5 per cent, up from 4.9 per cent recorded in 2014-15 fiscal. The government the GDP growth to be 5.5 per cent in 2014-15, up from 4.7 per cent recorded last year.

REAL ESTATE OVERVIEW:

The real estate sector in India assumed greater prominence with the liberalization of the economy, as the consequent increase in business opportunities and labour migration led to rising demand for commercial and housing space. At brsent, the real estate and construction sectors are playing a crucial role in the overall development of India's core infrastructure. The Indian real estate sector has traditionally been dominated by a number of small regional players with relatively low levels of expertise and/or financial resources. Residential real estate industry has witnessed stupendous growth in the past few years owing to the following reasons:

• Continuous growth in population

• Migration towards urban areas

• Ample job opportunities in service sectors

• Growing income levels

• Rise in nuclear families

• Easy availability of finance

Demand for houses increased considerably whilst supply of houses could not keep pace with demand thereby leading to a steep rise in residential capital values especially in urban areas.

OPPORTUNITIES:

Expects housing demand from the mid income residential segment to remain strong as there is significant demand in this category across the country. Increasing disposable incomes, rapid urbanization, and strong demographics are some of the trends favoring the mid-income residential market. Monetary Easing The real estate sector performance is directly bound by the country's economic fundamentals and monetary policies. The RBI had lowered its policy rate to 7.5% in March 2015 after a similar cut in January on the back of softening inflation and the government's commitment to continue with the fiscal consolidation programme. Monetary easing initiatives will provide an impetus to housing demand. A roll-back in rates can positively impact sentiments and encourage home buyers and real estate developers.

THREATS & CHALLENGES

Regulatory Hurdles:

Unfavorable changes in government policies and the regulatory environment can adversely impact the performance of the sector. There are substantial procedural delays with regards to land acquisition, land use, project launches and construction approvals. Retrospective policy changes and regulatory bottlenecks may impact profitability and affect the attractiveness of the sector and companies operating within the sector.

Funding Problems:

The RBI has set a threshold of 15% for the total maximum exposure of banks to real estate, including individual housing loans and lending to developers for construction finance which is quite low and is curtailing the growth of the sector. Absence of long term funding from banks is forcing developers to look at alternative sources of funds, most of which do not offer affordable interest rates.

Shortage of Manpower & Technology:

Despite being the second largest employer in the country the construction sector as a whole faces a manpower shortage. Further the sector is heavily dependent on manual labour which increases the timelines for projects and results in supply getting deferred. Hence less labour intensive alternative methods of construction need to be adopted on a large scale through training and skill development of manpower.

OUTLOOK:

The headwinds facing the Indian economy over the past couple of years are quickly abating. A combination of beneficial turns in commodity and interest rates cycles, a favourable policy environment and an improved consumer and investor sentiment is likely to lead to a far improved demand environment. We have an exciting launch pipeline for FY16 which should help us take advantage of the improved dynamics.