KB Brings Affordable Single- Family Housing to India

Agenda Company Overview/New Product Mode of Entry Market Environment & Competitive Analysis Finances Risks

Company Overview KB Home One of the largest home builders in the United States (37,140 homes, $9.4 Billion in Revenue). French Subsidiary (Kaufman & Broad S.A.) builds American homes with a French twist. Operational Model, KBnxt, has been a success. Current US market conditions require diversification. Survey Develop New Communities Custom Design Customer Service Build

Company Overview KB Home One of the largest home builders in the United States (37,140 homes, $9.4 Billion in Revenue). French Subsidiary (Kaufman & Broad S.A.) builds American homes with a French twist. Operational Model, KBnxt, has been a success. Current US market conditions require diversification. Survey Develop New Communities Custom Design Customer Service Build

New Service Concept Deliver custom built, American style homes to India. Leverage catalog of American designs, add Indian customizations. Place KB Home Design Studios in popular retail locations. Used a phased approach to introduce ourselves to the market. Phase 2 (100 acres) Phase 1 (25 acres) Phase 3 Full Scale 18 mos. 30 mos. 0 mos.

Mode of Entry Foreign Direct Investment Establish a joint-venture with local homebuilder. We supply capital and knowledge. Local homebuilder supplies land, knowledge of local market, building codes, and a resource pool.

Organizational Structure Start with a Project Structure and morph into a full Organization Structure. Phase 1 Phase 2 Phase 3

Market Environment & Competitive Analysis PopulationResidents with Buying Power % Population under 20 Per Capita Income GDP Growth Rate Housing Shortage Estimate billion300 million58%$5398%22 million India Demographics : Housing Shortage

Market Environment & Competitive Analysis Type of Development Required Minimum Size of Development Minimum Equity Investment Prior to Feb 2005 (no reforms) Integrated Townships Only 100 acres$10 million individual, $5 million Joint Venture Post Feb 2005 (post reforms) Unlimited Categories 25 acres$10 million individual, $5 million Joint Venture FDI Regulations : Feb 2005 Housing Reforms

Market Environment & Competitive Analysis EconomyPopulationComments MumbaiCommercial & Entertainment : Strong 16 millionLand is premium as it is located on Salsette Island CalcuttaManufacturing : Weak13 millionEconomy in dire straits from closing plants DelhiFinancial & Commercial : Very Strong 12 millionConcern : Lack of Infrastructure ChennaiAutomobile, Software & Technology : Very Strong 6 millionLand is very expensive BangaloreTechnology : Very Strong5 million$6460 per capita income; (Target Market) Major Indian Cities Snapshot

Market Environment & Competitive Analysis Style of HousingDevelopment Locations Year Est.. Website Ansal PropertiesTownship and Group Housing All over India DLF UniversalAll Styles Including Luxury Single Family Primarily Delhi (Gurgaon) HiranandaniMixed Use TownshipMumbai PrestigeApartment and Villa Styles Bangalore Major Builders In India

Market Environment & Competitive Analysis Growing trend towards American Style housing fuelled by burgeoning middle class Major Obstacle Missing Title Insurance + Corruption = Higher Land Cost

Market Positioning & Competitive Strategy Positioning: Perceptual Map

Market Positioning & Competitive Strategy Positioning: Strategy Canvas vs. Other Housing Options High Low Design Options Quality Time to Move Cost Financing Options Warranty Able to Modify Later KB India Multi-unit Housing Apartments +---=++

Market Positioning & Competitive Strategy Target Market: The emerging fast-growing Middle Class The Four P’s: Price: Close to the cost of Multi-family housing when HOAs are considered (Average $150,000) Place: Bangalore, India Product: Mass-Customized Single Family Homes Promotion: Internet, Traditional Advertising, Referral, Design Center

Market Positioning & Competitive Strategy Growth Strategy 18 Months: 25 Acre Development Complete (Sold and Built) 100 Acre Development Started (Land Purchased) 30 Months: 100 Acre Development Complete (Sold and Built) If Successful: New Infrastructure introduced for mass entry 1000 Acre Development Started

Finances Assumptions Underlying the Scenarios for KB Homes India Phase 1 – 1/1/07 to 6/30/08 (18 months) – Fiscal Year 2008 Product or Service VariableMost Likely Pessimistic Scenario Scenario New Home Construction Construction Cost75% of Sale Price 90% of Sale Price (Land + Labor) General Admin. Expense12% of Sale Price 12% of Sale Price Land Needed25 acres 25 acres Units to be Built Units Sold at Full Price Units Sold at Discount0 30 Tax Rate34% 34% Effect on Income Capital Required$20,000,000 $23,000,000 EBIT $2,850,000 ($1,350,000) Retained Earnings $1,900,000 ($1,350,000) Return on Equity 9.5% (5.9%)

Finances Assumptions Underlying the Scenarios for KB Homes India Phase 2 – 7/1/08 to 6/30/09 (12 months) – Fiscal Year 2009 Product or Service VariableMost Likely Pessimistic Scenario Scenario New Home Construction Construction Cost75% of Sale Price 90% of Sale Price (Land + Labor) General Admin. Expense12% of Sale Price 12% of Sale Price Land Needed100 acres 100 acres Units to be Built Units Sold at Full Price Units Sold at Discount0 120 Tax Rate34% 34% Effect on Income Capital Required$85,000,000 $101,500,000 EBIT $12,600,000 ($6,560,000) Retained Earnings $8,316,000 ($6,560,000) Return on Equity 9.8% (6.5%)

Finances Assumptions Underlying the Scenarios for KB Homes India Phase 3 – 7/1/09 to 6/30/12 (36 months) – Fiscal Year 2010, 2011, 2012 Product or Service VariableMost Likely Pessimistic Scenario Scenario New Home Construction Construction Cost75% of Sale Price N/A (Land + Labor) General Admin. Expense10% of Sale Price N/A Land Needed1000 acres N/A Units to be Built6000 N/A Units Sold at Full Price6000 N/A Units Sold at Discount0 N/A Tax Rate34% N/A Effect on Income Capital Required$886,000,000 EBIT $154,000,000 Retained Earnings $101,000,000 Return on Equity 11.4%

Finances Summary of Key Financial Metrics by Fiscal Calendar Year (Most Likely Scenario) Year Total Capital Required$20M $85M $167M $351M $368M $991M Revenue Generated$22.5M $99M $198M $416M $437M $1,172M EBIT$2.5M $12.6M $29M $61M $64M $169M Retained Earnings$1.9M $8.3M $19M $40M $42M $111M Return On Equity9.5% 9.8% 11.4% 11.4% 11.4% 10.7% Units Sold Summary of Key Financial Metrics by Fiscal Calendar Year (Pessimistic Scenario) Year Total Capital Required$23M $102M N/A N/A N/A $125M Revenue Generated$21.6M $95M N/A N/A N/A $116.6M EBIT($1.4M) ($7M) N/A N/A N/A ($8.4M) Retained Earnings($1.4M) ($7M) N/A N/A N/A ($8.4M) Return On Equity(5.9%) (6.5%) N/A N/A N/A (6.7%) Units Sold N/A N/A N/A 750

Risk Recognition & Reduction ThreatsMitigation Strategy Government/Tariff and Excise Tax CEO of KB Home, India will need to have knowledge about how to handle foreign investment. FDI requires land improvement, which we will meet. Property Market Transparency Risk We will purchase already titled land from a developer’s inventory. Lead time to Establish Business We plan to have a lead time of 6 months, so we do not anticipate this to be a problem. InfrastructureThe private sector is becoming more involved with areas such as ports and roads. Our mitigation will be to choose our locations in areas where infrastructure is already established. Building CodesVerify building partner has detailed experience and understanding of local building codes.

Summary New Product Mass produced, affordable single-family homes in Bangalore, India Why India? Shortage of housing Growing middle class Available workforce

Summary Mode of Entry Partnering with a local contractor Phased growth plan Financing Use of KB Home’s available cash reserves Loans for later phases if needed Implication Diversification of investments Less reliance on shifting US Housing Market

Now is the Time India is the Place