Ansal Housing & Construction Ltd. (AHCL) is a Real Estate Company prone to inherent business risks like any other organization. This document is intended to formalize a risk management policy the objective of which shall be identification, evaluating, monitoring, and minimizing identifiable risks.

This is in compliance with clause 49 of Listing Agreement, which requires AHCL to lay down procedures about the risk assessment and risk minimization.
 

The Board of Directors of the Company and the Audit Committee of Directors shall periodically review the risk management policy of the Company so that management controls the risk through properly defined net work.
 

Head of Departments shall be responsible for implementation of the risk management system as may be applicable to their respective areas of functioning and report to the Board and the Audit Committee.

Industry Structure, Developments, Opportunities and threats

The Realty Sector is projected to grow at the rate of 30% annually over next 2-3 years. However, issues relating to high interest rates, the sub-prime crisis in the Western Economy, Inflation and abnormal Oil Prices are causing some concerns in the market. The linkage as to how sub-prime will impact India is unclear as major banks which have been affected have not leant in the same manner in India. The Bankers feel that India still looks comfortable in its future prospectus. In due course, it is expected that National and International efforts will help rein in inflation and oil prices and may help bring down the interest rates.

The National Urban Housing and Habitat Policy, 2007, envisages increased public private partnership in the housing sector and encourages integrated townships in urban areas across the country. In order to realize the dream of affordable housing, the Government is committed to increase public private partnership to build 25
million houses across the country over the next five years.

The expectation of the private sector is that Government includes incentives like additional floor area ration and land availability at cheaper price and transferable development right for Real Estate development, Besides the Government had done little to streamline the process of sanctioning involved in the course of obtaining project
sanctions the high incidence of stamp duties in some states still continue to plaque even industry. Faster approvals for projects and reduction in the number of agencies/ authorities involved in the sanctioning process will help grater and timely supply of end products. This can to same extent address the concerns of the Government of high Real Estate prices.

The concern for Real Estate Industry has been tightening of the lending norms to the Real Estate Sector by Reserve Bank of India. It has been highly reactive to banks' real estate exposures for over two years now as property prices surge. This left developers with two options; IPOs and PEs. The first one is now drying out.

If the mayhem in the stock market continues, other markets would also be impacted to some extent. In case, inflation and market volatility continue on a sustained basis, we might see home buying getting delayed by the actual buyers. The overheated markets like that of Mumbai and Gurgaon may be marginally rationalized this year.

Further, the spotlight is focused on the fact that 16% of the Indian work force is engaged in Construction and Transport Sector. It is estimated that overall employment generation in the economy on account of additional investment in the Construction/Housing Sectors is eight times the direct employment. In view of the substantial use of cement, steel marble/ ceramic tiles, electrical wiring, PVC pipes and various types of fittings; construction activity has a multiplier effect on industrial demand for these items.

Risks and Concerns

Rising Petrol price, inflation and interest rates has started causing some concerns. Apart from softening demand, execution of projects and de-risking of business models will be the key challenges for realty firms going forward.

Affordability can come only with smaller unit sizes and that can be created within exiting FSI norms. So, it is expected that the Government will relax the density norms as per requirements of the present day.

According to a Brix Research Study, the market is demanding affordable housing units of between Rs. 5 and Rs. 15 Lacs, But with the existing laws, the Developers face lot of difficulties. For example currently the FSI and PPD (proposal to increase prescribed on density) laid down in the Gurgaon Master Plan 2021 roughly translate into 50-55 apartments of 1750 -20000 sq. ft area in an acre of land and thus making the minimum affordable unit for apporx, 45 to 55 lacs.

We need to change the norms that have been fixed about decades ago so as to achieve the dream of affordable housing everywhere.

The cost of construction materials like Cement and Steel, power, water and labour have speedily increased. Added to this are the complicated and slow Government approvals. These are some areas of concern which need to be looked into by the respective Government Departments.