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.

1.1 Industry Structure, Developments, Opportunities and threats.

In the F.Y 2010-11 India’s economic performance has been robust and real GDP is estimated to have grown by nine percent.

This has been powered by a rebound in the agricultural sector following the drought in 2009-10 and a sharp pick-up in private consumption an gross fixed capital formation.

The real estate sector in India is of great importance. According to the report of the Technical Group on Estimation of Housing Shortage, an estimated shortage of 26.53 million houses during the Eleventh Five Year Plan (2007-12) provides a big investment opportunity.

According to a report ‘Emerging trends in Real Estate in Asia Pacific 2011',India is the most viable investment destination in real estate. The report, which provides an outlook on Asia-Pacific real estate investment and development trends, points out that India, in particular Mumbai and NCR, are good real estate investment options for 2011. Residential properties maintain their growth momentum and hence are viewed as more promising than other sectors.

Further, real estate companies are coming up with various residential and commercial projects to fulfill the demand for residential and office properties in Tier-II and Tier-III cities. The growth in real estate in Tier-II and Tier-III cities is mainly due to increase in demand for organized realty and availability of land at affordable prices in these cities.

Risks and Concerns

Liquidity risk
The real estate investment market is still in its infant stage. The time required for liquidity of real estate property can vary depending on the quality and location of the property.

Regulatory risks
In terms of property ownership, permission from the Reserve Bank of India is required for foreign investors. For capital repatriation, investors need to apply for approval from the RBI, and foreign direct investment is limited to a limited set of opportunities (e.g. townships).

The REMFs work within the SEBI framework. Being a developing and growing sector, the rules, regulations and legalities demonstrate frequent changes, making it seem as a cumbersome investment option to the investors.

Property market transparency risk
The Indian property market has low transparency when compared to the more mature and developed real estate markets. Although market transparency has improved, reliable and consistent information on the Indian property market is still not easily available.

Macroeconomic risks
Interest rates, inflation and exchange rate risks are amongst the important macroeconomic indicators and have shown decreased volatility.

Owner Ship & Land Title Issue
Lack of information and low transparency in the real estate segment in India, coupled with the age old property related issues discourages the investment of the large players in the semi urban and rural areas thus slacking an overall growth of the real estate sector.