Housing & Urban Development Corporation Ltd

Dear Shareholders, Ladies & Gentlemen,

The world is witness to India's resurgent growth story. Amidst the heightened global economic uncertainty where the global growth is likely to bottom out at around 3.0 per cent in 2023-24, India continues to remain a ‘bright spot' as the fastest growing economy in the world and on track to be the 3^rd largest economy by financial year 2028. Though the global pandemic largely receded by the onset of financial year 2022-23, the twin impacts of geo-political tensions arising out of Russia-Ukraine war and emergence of global inflationary pressure posed hurdles and uncertainties to the global economic growth during financial year 2022-23. The interest rates were seen moving up as major central banks, including Reserve Bank of India (RBI) resorted to hiking the policy rates to combat inflation, pushing up domestic lending and borrowing rates. However, your Company successfully navigated through this uncertain business environment during financial year 2022-23, by registering overall loan sanctions of 24,572 crore and disbursements of 8,466 crore during the financial year.

I would like to share the highlights of HUDCO's performance during financial year 2022-23, vis-a-vis the economic environment, challenges faced and future outlook of the Company, which would clearly demonstrate that your Company is on a high growth path in its continued efforts for building assets for the nation.

1. Economic Environment

India's growth momentum would continue to be the fastest in the next two years as per IMF-World Economic Outlook Update Report,

July 2023, with the highest growth rate of 6.1 per cent in 2023-24 and 6.3 per cent in next fiscal. As per latest data released by National Statistical Office (NSO), the estimated growth in real GDP during 2022-23 was 7.2 per cent(Provisional estimates of national income for 2022-23, dated 31^st May 2023). Growth was supported by a visible pick-up in the services sector. The disaggregated data showed that the Q1, Q2, Q3 & Q4 GDP had grown by 13.1%, 6.2%, 4.5% & 6.1% respectively in 2022-23, particularly the Q4 growth was better-than-expected.

During the financial year 2022-23, RBI raised the policy repo rate six times between May 2022 and February 2023, from 4% to 6.5% to subdue the inflationary pressures. This resulted in a high interest regime in the domestic economy posing challenges to domestic growth prospects. Further, as per RBI's latest monetary statement (June 2023), the GDP growth is likely to be 6.5 percent this fiscal on the back of supportive domestic demand conditions. This is indicative of India's continued economic resilience and strong macro- economic fundamentals.

2. Sectoral Overview and Government Policy Initiatives

One of the key reasons for India's sustained growth is the contineous investment in real estate sector with its strong income and employment multiplier effects through ‘forward' and ‘backward' linkages with other industries in the economy. The Govt. of India's focus on ‘infrastructure-led economic growth' is further outlined through Union Budget 2023-24, with capital investment outlay for infrastructure has been increased by 33% to 10 lakh crore, which is 3.3 per cent of GDP. States and cities will be encouraged to undertake urban planning reforms and actions to transform cities into ‘sustainable cities of tomorrow'. Through property tax governance reforms and ring-fencing user charges on urban infrastructure, cities will be incentivized to improve their credit worthiness for Municipal Bonds. Further, similar to the RIDF, an Urban Infrastructure Development Fund (UIDF), through use of priority sector lending shortfall, has been established and being managed by the National Housing Bank, which will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities. The outlay for Pradhan Mantri Awas Yojana (PMAY) has been enhanced by 66 per cent to over 79,000 crore (Union Budget speech 2023-24).

3. Emerging Issues in Sustainable Urbanisation, Housing and Urban Infrastructure

India holds the current Presidency of economically powerful G20 countries. Adopting the Indian philosophy of "Vasudhaiva Kutumbakam"- One Earth One Family One Future, the G20 Presidency provides a strong platform for furthering our resolve to achieve the UN Sustainable Development Goals (SDGs) within the defined timeline of 2030, particularly sustainable urbanization, resilient infrastructure development, addressing climate change, green economic growth and transformative habitat development through 5 key pillars: Finance, Technology, Inclusion, Partnerships and Capacity Building. Further, various available data and Reports, such as World Bank Report, NIP Report, etc., point towards a sustained increase in urbanisation level and consequent increase in investment in housing and urban infrastructure sectors. The Government of India has been undertaking various policy measures for orderly & sustainable urbanisation and catalysing steady flow of investments into the housing and urban infrastructure sector. All these emerging developments have great potential for HUDCO to play catalytic roles in addressing the requirements of sustainable & transformative habitat development.

4. Operational and Financial Performance

HUDCO in its glorious journey of 53^rd years, since its inception in 1970, has cumulatively, as on 31^st March 2023, sanctioned a total of 17,335 housing and urban infrastructure projects with a total loan of 2,36,555 crore and disbursements of 1,96,612 crore. Further, your Company has sanctioned financial assistance to more than 196.48 lakh housing units both in rural and urban areas in the

Country, of which 187.27 lakh (95.31%) pertains to EWS / LIG categories. In addition, under HUDCO Niwas, a retail lending window, your Company has cumulatively sanctioned financial assistance of 6,871 crore to 3.86 lakh individuals and released an amount of 5,178 crore.

The Operational and Financial highlights during the financial year 2022-23 are as follows: a) Under Housing sector, HUDCO has sanctioned 5 projects with a loan assistance of 3,466 crore, inclusive of 12 crore under HUDCO Niwas, thereby facilitating construction of 3,49,308 dwelling units. An amount of 1,838 crore has been released (inclusive of 9 crore under HUDCO Niwas) during the financial b) Under the Urban Infrastructure portfolio, HUDCO has sanctioned 36 projects with a loan assistance of 21,106 crore covering various sectors like Water Supply, Smart City, Transport Nagar, Social Infrastructure, Commercial Infrastructure, Road & Transport, Power, etc. Further, a release of 6,628 crore was made during the year in various schemes. c) HUDCO is actively participating in Government of India flagship programmes such as Smart City Mission (SCM), Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Jal Jeevan Mission (JJM), etc. In the financial year 2022-23, HUDCO has provided financial assistance of 170 crore for Implementation of Smart City Project at Kohima and 50 crore for infrastructure development work in Udaipur Smart City, Rajasthan. d) Your Company has reported total income for the financial year 2022-23 at 7086.18 crore (previous year

6997.66 crore) inclusive of other income of 36.72 crore (previous year 43.58 crore), while the Profit before Tax (PBT) for the year was 2289.41 crore (previous year 2345.94 crore) and Profit after Tax (PAT) was1701.62 crore (previous year 1716.60 crore). During the period, your Company has maintained the pace of growth with a growth of 1.26 % in total income and marginal decline of 2.41% in Profit before Tax (PBT). Your Company has registered a growth of 6.75% in its net worth that has reached 15,445.25 crore in financial year 2022-23 from 14,468.32 crore in financial year

2021-22. e) The Board of Directors of your Company had earlier approved payment of interim dividend @ 7.50 %, i.e., 0.75 per equity share having face value of 10/- each, totalling to 150.14 crore on the paid-up equity share capital of the Company in March, 2023 and the same has been paid. Further, the Board of Directors have also recommended payment of final Dividend @ 31.00 %, i.e.,3.10 per equity share, having face value of 10/- each, for the financial year 2022-23, subject to approval of the shareholders at the ensuing 53^rd Annual General Meeting. f) As at the end of the financial year ended 31 ^st March 2023, HUDCO reported Gross NPA of 2,759.17 crore, which constitutes 3.42% of total loan portfolio. The Net NPA as on 31^st March 2023 is 407.25 crore which constitutes 0.52% of Net loan outstanding as against MoU target of 0.35%. During the year 2022-23, an amount of 145.58 crore was recovered from the accounts which were in NPA as on 31.03.2022. As on 31^st March 2023, Loan Overdue to Net Loan Assets ratio is 3.71% as against MoU target of 6.50%. g) During the year, HUDCO has supported projects in the North-Eastern Region, and sanctioned 9 housing and urban infrastructure schemes with loan amount of 279.13 crore in the States of Assam, Tripura, and Nagaland.

5. Credit Rating of HUDCO

During the financial year 2022-23, the Company's long-term domestic borrowing programme was awarded the highest credit rating of

‘IND AAA/Stable', ‘[ICRA] AAA (Stable)' and ‘CARE AAA [Triple A] Stable' by M/s India Ratings & Research (IRRPL), M/s ICRA and M/s CARE Ratings respectively. The Company also got its short-term borrowing programme rated, obtaining the highest rating of "IND A1+', ‘[ICRA] A1+'' and ‘CARE A1+ [A One Plus]', by the above-mentioned Credit Rating Agencies. As on 31^st March, 2023, HUDCO for its International Borrowing Programme continued to enjoy International Credit Rating of ‘Baa3' with Stable outlook and ‘BBB-' with Stable outlook, respectively, from Moody's and FITCH, International Credit Rating Agencies. Both the assigned ratings are of investment grade and are at the Sovereign ceiling and equivalent as that of our Country.

HUDCO as the premier techno-financial institution assists the Ministry of Housing and Urban Affairs (MoHUA) in scrutiny and inspection of sample projects / DPRs under Pradhan Mantri Awas Yojana (Urban) - Housing for All (PMAY-U) Mission prior to their consideration by the Ministry for sanction of central assistance. As part of the above, HUDCO during financial year 2022-23, carried out site and/or desk scrutiny of 40 projects with project cost of 5717.37 crore & GoI assistance of 1504.26 crore covering 1

Affordable Housing in Partnership (AHP)project,38BeneficiaryLed Construction (BLC) - New Construction/ Enhancement and 1 In-situ Slum Redevelopment (ISSR) project at various locations in 40 towns/ cities under 13 States/ UTs. Cumulatively up to 31^st March 2023, HUDCO has carried out site and/or desk scrutiny of 595 projects for 12.37 lakh DUs with project cost of 57,946.06 crore & GoI assistance of 18,271.88 crore, covering 62 AHP projects, 511 BLC (New Construction/Enhancement) & 22 ISSR projects (inclusive of 1 ISSR – AHP project) at 431 towns/ cities under 34 States/UTs. HUDCO, as a Central Nodal Agency (CNA), has executed Memorandum of Understanding with 91 Banks/Primary Lending Institutions

(PLIs) for EWS/LIG and 87 Banks/PLIs for MIG-I and MIG-II categories. During the financial year 2022-23, HUDCO has disbursed subsidy of 628.43 crore to 25,718 beneficiaries under EWS/LIG category. Cumulatively, HUDCO has disbursed CLSS subsidy of 2635.32 crore to 1,11,955 beneficiaries, throughout the country till 31^st March, 2023. Out of this, an amount of 2297.40 crore has been disbursed to 95,887 EWS/LIG beneficiaries, while an amount of 337.92 crore has been disbursed to 16,068 MIG category beneficiaries.

7. Human Settlement Management Institute (HSMI)

Human Settlement Management Institute (HSMI) of HUDCO is involved in both Research & Training activities in urban sector. The

Quality Management System of HSMI complies with ISO 9001:2015. Cumulatively, HUDCO's HSMI has benefitted about 54,764 officials programmes from 1985-2023 and continues to provide training support for professionals as well as a forum for interaction of administrators, professionals, researchers, and others engaged with the issues of human settlement development. So far, it has provided training sponsored by Ministry of External Affairs, GoI to more than 1170 overseas participants through 51 ITEC (Indian Technical & Economic Cooperation) and 6 e-ITEC training programmes.

During financial year 2022-23, HSMI has conducted 19 training programs on capacity building, imparting training to 1138 participants whichincludedHUDCOofficialsand participants from ULBs & other stakeholders on diverse subjects like ‘Only One Earth Living

Sustainably in Harmony with Nature', ‘Analysis of State Budgets and Generation of Business through Innovative Project Financing', Strategies for increasing HUDCO's Consultancy income, ‘Stress and Anger Free Living & lifestyle', and ‘Chair Yoga' etc. HSMI has also conducted 2 e-ITEC programmes sponsored by the Ministry of External Affairs(MEA),GoI,benefitting23 overseas professionals on ‘Housing for Sustainable Habitats-Policy Planning, Design and Technologies' and ‘Making Cities Future Ready Smart and Carbon Neutral'. HSMI organized the 50^th International Training Programme on ‘Realizing the Right to Adequate Housing in the context of Habitat III New Urban Agenda - Policies, Planning and Practices' sponsored by MEA, GoI under its ITEC Programme attended by 24 delegates from 20 developing countries and the 51^st ITEC training programme on "Formal solutions to Informal Settlements" attended by 25 delegates representing 19 countries. HSMI also organized CITYNET two-day on-line Training Programme for Senior and mid-

Urban Local Bodies (ULBs) and HUDCO officials on ‘Balancing the Budgets of ULBs - Resource Mobilisation v/s levelofficials

Responsibilities' attended by 80 participants.

Further, SHELTER, an ISSN-accredited publication of HUDCO's HSMI, was brought out twice in the year, April 2022 & October 2022, on the themes of ‘Inclusive Housing' and ‘Mind the gap: leave no one and no place behind' respectively.

8. Human Resources Management

HUDCO recognises the value of Human Resources in delivering accelerated performance and contributing to the growth of the organization. It considers human dimension as the key to Organization's success. Several initiatives for development of Human Resources to meet new challenges in the competitive business environment have gained momentum. Your Company has a team of professionals from various disciplines like finance, projects, HR, Law, IT, social sciences, etc. The guiding principle of HUDCO's Human

Resource Management Policy is to ensure availability of competent, motivated, and effective workforce to facilitate achievement of its full potential at all times to achieve organizational goals. As on 31^st March, 2023, HUDCO had a workforce of 673 employees which included 214 women employees, constituting 31.79% of its total strength. Women representations have gone across various hierarchical levels. HUDCO has been complying with all the directives and guidelines issued by the Government of India regarding reservation for SC/ST/OBC/PwD/ Ex-Servicemen/ EWS.

9. Corporate Social Responsibility (CSR)

During the financial year 2022-23, an amount of44,98,12,667/- was to be incurred on CSR activities, out of which CSR assistance amounting to 26,67,94,463/- for 19 proposals have been approved. However, no expenditure from the proposals approved during the year has been incurred, as the agencies were in process of completion of documentation, etc., and accordingly, the unspent amount has been transferred to the unspent CSR account opened in a scheduled bank and shall be spent as per provision of CSR amended rules of Companies Act. Further, during the financial year 2022-23, the Company has spent a total amount of3,20,72,843/- for the ongoing projects sanctioned prior to 31^st March, 2021. As on 31^st March, 2023, an amount of 18,30,18,204/- being the unspent CSR amount other than the ongoing CSR activities from the CSR amount allocated for the financial year 2022-23, shall be transferred to one of the funds specified in Schedule VII of the

Companies Act, 2013 within the stipulated time period, i.e., on or before 30^th September, 2023. Further, an amount of 25,87,90,596/- being the unspent CSR amount other than ongoing CSR activities as on 31.03.2022 (16,99,00,000/- is the unspent CSR budget of financial year 2021-22 and8,88,90,596/- up to 2020-21) was transferred to ‘Swachh Bharat Kosh', a fund specified in Schedule VII of the Companies Act, 2013 on 30^th September, 2022 in accordance with details mentioned in Annual Report on CSR activities for financial year 2021-22.

HUDCO is fully committed to promote and establish a fair, transparent, and ethical system of Corporate Governance. HUDCO ensures transparency in all its operations with special emphasis on financial prudence, accountability and ensuring customers/ stakeholders' satisfaction. In terms of regulation 34(3) of the SEBI (LODR) Regulations, 2015 and DPE guidelines, a report on Corporate Governance forms the part of the Directors' Report.

The twin impacts of pandemic and Russia-Ukraine war have posed challenges to the global economic growth but India continues to remain bright spot. The key to HUDCO's growth prospect is crucially linked to the urbanisation trend of the country. India's urban population is estimated to increase from 470 million in 2021 to 600 million by 2036 which would constitute about 40% urbanisation level (World Bank Report 2022).

The Report also estimated that India's cities require a capital investment of USD 840 billion in urban infrastructure and municipal services till 2036 in 2020 prices. Further, as per National Infrastructure Pipeline (NIP) Report, total capital expenditure requirement in infrastructure sectors in India during fiscals 2020 to 2025 is projected at about 111 trillion, including 19.19 trillion for urban infrastructure projects including affordable housing projects. Thus, with continuous rise in the urbanisation levels and commensurate increase in capital investment requirement, HUDCO's potential for quantum jump in business operations augurs well. The future outlook in terms of Government's sectoral focus and related developments have positive implications for HUDCO's medium-term and long-term strategies. Demand for housing across India continued to show resilience as reflected in NHB RESIDEX

– Composite price index for 50 cities, which indicates that the prices in 50 major cities in India has been steadily increasing. The enhanced allocation for Pradhan Mantri Awaas Yojana (Urban & Rural) by 66% to over 79,000 crore announced in 2023-24 Union Budget will have positive effect on the housing activities in the country. It is expected that viability gap funding requirements from the state governments would gather momentum by the middle of financial year 2023-24. HUDCO being a major partner in many such housing schemes by the various state governments would stand to benefit. Similarly, the Govt. of India's flagship programmes, AMRUT 2.0 which seeks to provide water supply to households, and Smart

Cities Mission, have been allocated 8000 crore each in 2023-24 Union Budget. The Swachh Bharat Mission (U) has been allocated 5,000 crore in 2023-24. All these allocations are going to catalyse investments in the urban development sector thereby creating business opportunities for HUDCO, as it has been proactively assisting various State Governments in implementation of Government of India programmes. Health infrastructure needs a boost all over the country. HUDCO would continue to fund Social Infrastructure Projects like Health Centres, Government Hospitals, Medical Colleges etc. as the State Governments would be requiring huge funds to expand their Health Care Infrastructure. HUDCO would also give priority for funding Urban Metro Rail projects of all major cities, as the Government is keen to expand the metro network in different cities and is looking for external participation for such projects. In order to align with the country's net zero goals, the government has adopted ‘Green Growth' as one of the seven key priorities (Saptarshi) to lead India in its ‘Amrit Kaal'. HUDCO is therefore poised to increase its funding to ‘green economy' sectors such as green buildings, sustainable transport, water, waste management, land management and renewable energy. Further, the ‘Blue Economy' holds the promise of being the next multiplier of economic growth and well-being and therefore, the GoI's vision of New India by 2030 highlights the Blue Economy as one of the 10 core dimensions of growth. As there is need for substantial capital infusion and investment for development of ports, shipyards, Sagarmala projects and other related infrastructure projects, the blue economy opens up huge opportunities for HUDCO to substantially increase its business operation in this segment.

The Board of Directors of your Company acknowledges its deep sense of appreciation for the continuous support, guidance and cooperation extended by the Government of India, especially the Ministry of Housing and Urban Affairs, Ministry of Rural Development, Ministry of Finance, Reserve Bank of India, National Housing Bank, Ministry of Corporate Affairs, Department of Public Enterprises, Regulatory/Statutory Authorities and various other departments of the Central/State Governments, Stock Exchanges, Depositories, Credit Rating Agencies, Registrar & Transfer Agents, Debenture Trustee(s) and other agencies. The Board of Directors also conveys its gratitude for the unstinting support and cooperation given by the shareholders, bondholders, public deposit holders, Bankers, Financial Institutions, Housing Boards, Development Authorities, Municipal/Local Bodies, and other stakeholders associated with the Company. The Board of Directors also acknowledges the valuable suggestions and guidance extended by Comptroller & Auditor General of India, Statutory Auditors, Secretarial Auditors, and other professionals associated with the Company.

The Board of Directors also take this opportunity to acknowledge and appreciate the hard work and efforts put in by HUDCO employees at all levels towards achievement of the all-round growth of the Company.