Credit Ratings Soar as Real Estate Sector Raises ₹400 Billion Through IPOs Since 2021
India's real estate sector demonstrates strong post-COVID recovery, marked by improved credit ratings, profitability, and a surge in IPOs, signaling growing investor confidence.
Real EstateCredit RatingsIposFinancial HealthInvestor ConfidenceReal EstateJul 30, 2025
Particularly post the pandemic, the real estate sector has demonstrated a strong ‘V-shaped’ recovery. The financial prudence of Indian real estate is evident in the improving credit ratings of companies, driven by better operating and profitability margins, leverage ratios, and other financial metrics. To assess this, we have analyzed the aggregate financials of the top 50 listed real estate companies in India in terms of profitability, gearing, and market performance.
Credit deployment in the Indian real estate sector has seen a significant uptick in absolute terms, though the dynamics between banks and NBFCs have evolved. While the share of banks in overall credit exposure to Indian realty has increased notably, NBFCs have become relatively averse to real estate exposure post the 2018 crisis. Despite this, the outstanding loan book for both banks and NBFCs has grown substantially in the last decade.
Gross bank credit in India has grown significantly, from INR 109.5 lakh crore in FY 2021 to INR 182.4 lakh crore in FY 2025. Bank credit in the real estate sector has impressively doubled in the same period, from INR 17.8 lakh crore to INR 35.4 lakh crore. Real estate now accounts for close to one-fifth of the bank credit deployment in the country, signaling growing lender confidence in the sector.
In addition to increased lending to the real estate sector, the quality of loans has also improved significantly. The proportion of Gross Non-Performing Assets (GNPA) in the construction industry loan book of banks has significantly reduced from 23.5% in March 2021 to 3.1% in March 2025.
“Indian real estate sector continues to demonstrate resilience and financial prudence even in the wake of external volatilities. In fact, the strong financial health of the sector is demonstrated by significantly higher proportions of credit rating upgrades during FY 2025 as compared to upward revisions in other economic sectors. 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 & warehousing, retail, hospitality, etc. Looking ahead, the overall outlook for Indian real estate remains positive in the near-mid-term amidst sustained global as well as domestic investor confidence,” said Badal Yagnik, Chief Executive Officer, Colliers India.
Increasing appetite for real estate lending by financial institutions has primarily stemmed from the financial prudence displayed by the sector. The top 50 listed real estate companies have shown impressive improvements in terms of profitability, cash flow realization, and balance sheet performance over the last five years. One of the most significant trends is the improvement in profitability metrics – 62% of the top 50 listed real estate companies had higher profitability margins at the end of FY 2025 as compared to 23% in FY 2021. Consistent strong demand, higher revenue realization, and better operating efficiencies can be attributed to the increasing profitability of real estate companies.
Additionally, the debt-to-equity ratio, a critical indicator of financial discipline, has shown consistent improvement over the past five years. More than 60% of the leading real estate companies in India have comfortable debt levels, reflected in the debt-to-equity ratio of less than 0.5 in FY 2025. This is particularly noteworthy considering that 43% of the leading real estate companies were low-leverage companies in FY 2021. Financial prudence at the Special Purpose Vehicle (SPV) level has culminated in comfortable debt levels at the consolidated level, highlighting a deliberate strategy among large developers to deleverage and enhance capital and operational efficiency.
Most economic sectors in India have rebounded strongly post-pandemic. However, the pace and extent of recovery in the real estate sector have been more pronounced than in other industries. This is reflected in a higher proportion of credit rating upgrades in Indian real estate in recent years. In fact, the real estate sector has outperformed the broader industry on credit quality metrics, with a leading Credit Rating Agency (CRA) reporting 23% of upgrades in its rated real estate portfolio versus a mere 1% of downgrades during the second half of FY 2025. The percentage of rating upgrades and downgrades across industries from the same CRA stood at 14% and 6% respectively in the same period.
While the extremely high number of upgrades vis-à-vis downgrades in H2 of FY 2025 in Indian real estate may rationalize over the next few years, it is still expected to outperform most economic sectors, driven by its inherent fundamentals. Rising revenues, improving operating and profitability margins, and steady debt deleveraging underscore the adoption of more sustainable and disciplined financial practices in Indian real estate, reinforcing its position as one of the promising sectors across the corporate landscape.
Real estate players are increasingly turning to public markets to raise capital, as reflected in the surge of Initial Public Offerings (IPOs) in recent years. In 2024 alone, India witnessed close to 160 fresh public issuances across sectors, comfortably outpacing issuances in 2023. Remarkably, the real estate sector saw 9 IPOs in 2024, raising nearly INR 138 billion – almost double the amount raised in the previous year. Since 2021, 30 IPOs have collectively raised close to INR 400 billion into India’s real estate sector. Heightened activity in the equity markets has continued into 2025 as well. The year has already seen 92 IPOs, including 7 real estate IPOs till date. Interestingly, real estate IPOs are expanding into newer categories such as flex spaces, with leading operators scaling their portfolios across cities and fast-tracking their public listing plans. Moreover, the introduction of REIT and SM-REIT offerings is democratizing real estate ownership for the retail investor. In the near to mid-term, several real estate companies, including Real Estate Investment Trusts (REITs), Small & Medium (SM)-REITs, hospitality players, residential developers, flex space operators, etc., are lining up for their IPOs with the regulator.
“Real estate players are increasingly tapping public markets to fuel their expansion and strengthen balance sheets, signaling growing investor confidence in the sector. The strong momentum seen in 2024 has carried into 2025, with seven real estate IPOs, raising more than INR 76 billion till 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. Indian real estate continues to draw strength from long-term stability and growing investor confidence, making it less vulnerable to global uncertainties,” said Vimal Nadar, National Director and Head of Research, Colliers India.
The future outlook remains particularly positive for residential and commercial real estate, led by strong end-user demand, favorable demographics, rising disposable income, and relatively lower interest rates. However, real estate developers and investors must remain cautious of potential risks, including interest rate fluctuations, urban land acquisition bottlenecks, and global economic headwinds that could moderate real estate growth.
Frequently Asked Questions
What has driven the improvement in the financial health of India's real estate sector?
The improvement in financial health is driven by structural changes, better operating and profitability margins, and financial prudence, including improved credit ratings, leverage ratios, and loan quality.
How has the credit deployment in the real estate sector changed in recent years?
Credit deployment in the real estate sector has significantly increased, with bank credit doubling from INR 17.8 lakh crore in FY 2021 to INR 35.4 lakh crore in FY 2025.
What is the significance of the reduction in GNPA in the construction industry loan book of banks?
The reduction in GNPA from 23.5% in March 2021 to 3.1% in March 2025 indicates improved loan quality and growing lender confidence in the real estate sector.
Why are real estate players increasingly turning to public markets for capital?
Real estate players are turning to public markets to raise capital, fuel expansion, and strengthen balance sheets, reflecting growing investor confidence in the sector.
What are the future outlook and potential risks for the real estate sector?
The future outlook is positive for residential and commercial real estate, driven by strong end-user demand and favorable demographics. However, potential risks include interest rate fluctuations, urban land acquisition bottlenecks, and global economic headwinds.
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