Financial Discipline Fuels Indian Real Estate Growth, Bank Credit Soars: Report
India's real estate sector has seen a significant boost in financial discipline, leading to increased bank credit, credit rating upgrades, and heightened investor confidence. From FY21 to FY25, the sector has outperformed other industries, with bank credit doubling and GNPA levels plummeting.
Real EstateFinancial DisciplineBank CreditCredit RatingsInvestor ConfidenceReal Estate NewsJul 29, 2025
After the COVID-19 pandemic, the real estate sector showed a 'V-shaped' recovery, with its credit and financial metrics outperforming other major industries. 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%. 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% in March 2021 to 3.1% in March 2025. “During FY25, the 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% of the top 50 listed real estate companies reported higher profitability margins for FY25, up from 23% in FY21. Consistent strong demand, higher revenue realization, and better operating efficiencies can be attributed to the increasing profitability of real estate companies. The debt-to-equity ratio has also improved over the past 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, signaling 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.
Frequently Asked Questions
How has the real estate sector improved its financial discipline?
The real estate sector has improved its financial discipline through better operating margins, profitability margins, and leverage ratios. This has led to more credit from banks and credit rating upgrades.
What is the trend in bank credit to the real estate sector from FY21 to FY25?
Bank credit to the real estate sector has doubled from Rs 17.8 lakh crore to Rs 35.4 lakh crore from FY21 to FY25, outperforming the average bank credit to other industries by 30%.
What has been the impact of the COVID-19 pandemic on the real estate sector?
The real estate sector showed a 'V-shaped' recovery after the COVID-19 pandemic, with its credit and financial metrics outperforming other major industries.
How has the quality of loans in the real estate sector improved?
The proportion of Gross Non-Performing Assets (GNPA) in the banks' loans to the construction industry has significantly reduced from 23.5% in March 2021 to 3.1% in March 2025.
What is the outlook for the real estate sector in terms of IPOs and REITs?
The real estate sector is expected to see continued momentum with diverse listings across segments such as flex spaces, hospitality, office, and residential. The anticipated upswing in SM REIT and REIT activity is promising for the entire sector.
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