Construction Industry News
According to CRISIL Ratings, asset reconstruction companies (ARCs) are expected to see a significant increase in the recovery rate of stressed residential real estate projects. The recovery could increase by 500-700 basis points, from 11% in March 2024 to 16-18% in March 2025. This improvement is driven by healthy demand, price increases in residential real estate and increased investor interest.
Recent changes in the Insolvency and Bankruptcy Board of India (IBBI) regulations are also expected to enable better resolution of stressed real estate assets. CRISIL's analysis of its securities portfolio, which includes 70 stressed projects covering an area of 66 million sq ft with Rs 9,000 crore in outstanding receipts, supports this outlook.
The residential real estate sector in the top six cities is expected to grow 10-12% this fiscal, fueled by strong economic growth and robust housing demand. Lower unsold inventories in major markets will help ARCs expedite the turnaround time of distressed projects with support from promoters or external investors.
About three-quarters of the projects analyzed became non-performing assets (NPAs) between 2019 and 2022 due to declining sales and slower collections during the COVID-19 pandemic. The rest are pre-2019 NPAs hit by weak demand and liquidity issues. Improved market conditions now make these projects viable for last-mile financing, improving recovery prospects for ARCs.
