Financial discipline drives momentum in Indian real estate sector, bank credit surges: Report
The credit rating of real estate companies rose due to better operating margins, profitability margins and leverage ratios, the report from real estate management firm Colliers India said.
After the Covid-19 pandemic, the real estate sector showed a 'V-shaped' recovery, with its credit and financial metrics outperforming other major industries, it added.
From FY21 to FY25, bank credit to this sector has doubled from Rs 17.8 lakh crore to Rs 35.4 lakh crore, outperforming the average bank credit to other industries by 30 per cent. Nearly one-fifth of bank credit deployment was in real estate, indicating lender confidence.
Further, the quality of loans has also improved significantly. The proportion of Gross Non-Performing Assets (GNPA) in the banks' loans to the construction industry significantly reduced from 23.5 per cent in March 2021 to 3.1 per cent in March 2025.
'During FY25, real estate sector had more credit rating upgrades than other economic sectors, demonstrating its robust financial health. The relatively higher credit quality of real estate loans is well supported by underlying strong demand-supply dynamics across multiple asset classes such as residential, commercial, industrial and warehousing, retail, hospitality, etc.,' said Badal Yagnik, Chief Executive Officer, Colliers India.
Around 62 per cent of the top 50 listed real estate companies reported higher profitability margins for FY25 up from 23 per cent in FY21. Consistent strong demand, higher revenue realisation, and better operating efficiencies can be attributed to the increasing profitability of real estate companies. The debt-to-equity ratio has also improved in five years, the report mentioned.
This led to the real estate sector outperforming the broader industry in the number of credit rating upgrades. Consequently, real estate companies increasingly access equity markets, signalling growing investor confidence in the sector. The real estate sector raised nearly Rs 138 billion in FY24 -- almost double the amount raised in the previous year.
'The strong momentum seen in 2024 has carried into 2025, with seven real estate IPOs raising more than Rs 76 billion until July. Moreover, the diverse listings across segments such as flex spaces, hospitality, office, residential, etc., and the anticipated upswing in SM REIT and REIT activity is promising for the entire real estate sector,' said Vimal Nadar, National Director and Head of Research, Colliers India.
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