Financial Discipline Boosts Indian Real Estate, Bank Credit Surges: Report
The Indian real estate sector has demonstrated significant financial discipline, leading to increased bank credit, credit rating upgrades, and heightened investor interest, according to a recent report.
Real EstateFinancial DisciplineBank CreditCredit RatingsInvestor ConfidenceReal EstateJul 29, 2025
The credit ratings of real estate companies have seen a significant boost due to better operating margins, profitability margins, and leverage ratios. The report notes that after the COVID-19 pandemic, the real estate sector experienced a 'V-shaped' recovery, with its credit and financial metrics outperforming other major industries.
From fiscal year 2021 (FY21) to fiscal year 2025 (FY25), bank credit to the real estate sector has doubled from Rs 17.8 lakh crore to Rs 35.4 lakh crore. This growth outpaced the average bank credit to other industries by 30 percent, with nearly one-fifth of bank credit deployment directed towards real estate, indicating strong lender confidence.
The quality of loans has also improved significantly. The proportion of Gross Non-Performing Assets (GNPA) in the banks' loans to the construction industry has dropped from 23.5 percent in March 2021 to 3.1 percent in March 2025. This reduction demonstrates the sector's robust financial health and the increasing reliability of real estate loans.
“During FY25, the real estate sector experienced more credit rating upgrades than other economic sectors, showcasing its strong financial health. The higher credit quality of real estate loans is well-supported by the strong demand-supply dynamics across multiple asset classes such as residential, commercial, industrial, and warehousing, retail, and hospitality,” said Badal Yagnik, Chief Executive Officer of Colliers India.
Around 62 percent of the top 50 listed real estate companies reported higher profitability margins for FY25, up from 23 percent in FY21. This improvement can be attributed to consistent strong demand, higher revenue realization, and better operating efficiencies. The debt-to-equity ratio has also shown improvement over the past five years, as mentioned in the report.
The real estate sector has outperformed the broader industry in terms of credit rating upgrades, leading to increased access to equity markets and growing investor confidence. In FY24, the sector raised nearly Rs 138 billion, almost double the amount raised in the previous year.
“The strong momentum observed in 2024 has continued into 2025, with seven real estate IPOs raising more than Rs 76 billion by July. Additionally, the diverse listings across segments such as flex spaces, hospitality, office, and residential, along with the anticipated upswing in SM REIT and REIT activity, are promising for the entire real estate sector,” said Vimal Nadar, National Director and Head of Research at Colliers India.
Frequently Asked Questions
What is the main reason for the improvement in the real estate sector's financial discipline?
The main reason for the improvement in the real estate sector's financial discipline is better operating margins, profitability margins, and leverage ratios, which have led to credit rating upgrades and increased investor confidence.
How much has bank credit to the real estate sector increased from FY21 to FY25?
Bank credit to the real estate sector has doubled from Rs 17.8 lakh crore in FY21 to Rs 35.4 lakh crore in FY25.
What is the significance of the drop in Gross Non-Performing Assets (GNPA) in the construction industry's loans?
The significant drop in GNPA from 23.5 percent in March 2021 to 3.1 percent in March 2025 indicates improved loan quality and the sector's robust financial health.
How has the profitability of real estate companies changed from FY21 to FY25?
The profitability of real estate companies has improved, with 62 percent of the top 50 listed companies reporting higher profitability margins in FY25, up from 23 percent in FY21.
What is the impact of the real estate sector's strong performance on equity markets?
The strong performance of the real estate sector has led to increased access to equity markets and growing investor confidence, with the sector raising nearly Rs 138 billion in FY24 and over Rs 76 billion in IPOs by July 2025.
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