Dear Stakeholders

I am delighted to present to you the 31^st Annual Report and the consolidated financial statements of PNB Housing Finance Limited for the year ended March 31, 2019. The fiscal 2018-19 was another eventful year for your Company. During the period, it pursued various growth opportunities, despite a challenging operational landscape.

The global economic indicators remained largely volatile during the fiscal owing to a variety of factors. These factors were US–China trade tensions, uncertainty over the UK’s exit from the EU, macroeconomic stress in Argentina and Turkey, disruptions in the auto sector in Germany, tighter credit policies in China, and financial tightening alongside the normalisation of monetary policy in the larger advanced economies. These factors, according to the International Monetary Fund, have contributed to significantly weakened global expansion, especially in the second half of 2018.

Closer home, India’s growth rate continues to be fast paced among the world’s major economies, as the country pursues broad-based, inclusive growth. The economic growth rate decelerated marginally in FY 2018-19, owing to a slowdown in private consumption, tepid increase in fixed investments, muted exports and slowdown in agriculture and automotive sectors. Headline inflation, a credible indicator of consumer and wholesale prices, declined throughout FY 2018-19, before firming up in recent months. The Reserve Bank of India (RBI) responded to the scenario by reducing key lending rates by 25 basis points twice in 2019.

To better regulate the non-banking financial company (NBFC) sector, the RBI has already issued draft guidelines requiring most NBFCs to set aside a liquidity buffer by investing in high-quality liquid assets, primarily sovereign bonds. The larger objective is to ensure that sector players are better governed and stronger; and are geared to pursue risk-adjusted long-term growth.

If we observe the country’s real estate space, we will find that it is undergoing significant transformation with the introduction of Real Estate (Regulation and Development) Act (RERA) and Goods and Service Tax (GST). The 2018 liquidity crisis among NBFCs – a leading source of funding for developers – resulted in the shortage of funds. Prompt regulatory oversight has helped contain the crisis and at the same time, the GST Council has slashed GST rates on housing units to induce demand. With RERA, a conducive environment for the return of equity participation has been created. Besides, Real Estate Investment Trusts (REITs) are expected to unveil more fund-raising avenues for cash-strapped developers.

Moreover, housing prices have stabilised across cities in recent years. This, in conjunction with prevailing policy reforms, presents a clear case of recovery in the coming years. The Government’s thrust towards affordable housing, coupled with increasing demand is likely to widen the opportunity landscape for housing finance companies, going forward. On the supply side, developers are likely to concentrate more on the mid and affordable segments, while unsold inventory levels are expected to decline further. Overall, growing population, urbanisation, rise of nuclear families and increasing disposable incomes are catalysing the residential housing sector.

Opportunities in the housing segment are as vast as they are promising, and PNB Housing is committed to make the most of the same. Your Company is concurrently driving multiple strategies: judiciously managing liquidity, leveraging a rich resource profile and maintaining a highly robust portfolio of assets and a balanced growth. Powered by strong systems and processes, a differentiated portfolio and focused business strategy, your Company is progressing with agile steps.

I am happy to share that PNB Housing delivered encouraging results in a rather challenging operating scenario. This is the result of a durable value system, future-focused strategies and a proactive team of go-getters, inspired by an overarching purpose to serve millions of home aspirants across the country. Your Managing Director, Mr. Sanjaya Gupta will take you through the highlights of the year in greater detail.

Your Company will continue to grow in step with the sweeping socio-economic transformation in the country and enrich its solutions spectrum to meet the changing requirements of customers. Before I conclude, I thank all members of the Board and the leadership team steered by Mr. Gupta, for their vision, tenacity and high-quality execution. I must also mention here that your Company’s unwavering focus on ethics and good governance has helped it navigate the challenges and sail towards new harbours of growth and opportunity.

I am grateful to all members of the PNB Housing family for their team spirit and to all stakeholders for their trust, integrity and accountability. I also wish to thank the regulator, the National Housing Bank for guidance and support; and I am happy to share that your Company continues to be in absolute compliance with the guidelines issued by them.

I am confident that this great enterprise of innovation, perseverance and resilience will continue to create value for all stakeholders; and I look forward to the new year with renewed confidence and optimism.

Yours sincerely,

Sunil Mehta

Chairman