Financial Discipline Fuels Indian Real Estate Sector's Growth, Bank Credit Surges
India's real estate sector has shown significant financial discipline, leading to increased bank credit, credit rating upgrades, and robust investor interest, according to a report by Colliers India.
Real EstateFinancial DisciplineBank CreditCredit RatingInvestor ConfidenceReal Estate NewsJul 29, 2025
The credit rating of real estate companies has risen due to better operating margins, profitability, and leverage ratios. After the pandemic, the sector demonstrated a ‘V-shaped’ recovery, with its credit and financial metrics outperforming other major industries.
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, outperforming the average bank credit to other industries by 30 per cent. Nearly one-fifth of bank credit deployment was in real estate, indicating strong lender confidence.
Moreover, the quality of loans has improved significantly. The proportion of Gross Non-Performing Assets (GNPA) in the banks' loans to the construction industry has reduced from 23.5 per cent in March 2021 to 3.1 per cent in March 2025.
“During FY25, the real estate sector saw 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 strong demand-supply dynamics across multiple asset classes such as residential, commercial, industrial, and warehousing, retail, and hospitality,” 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 realization, and better operating efficiencies have contributed 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 has led to the real estate sector outperforming the broader industry in the number of credit rating upgrades. Consequently, real estate companies are increasingly accessing 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, and residential, 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
What has been the key factor driving the real estate sector's financial discipline?
The key factor driving the real estate sector's financial discipline is the improvement in operating margins, profitability, and leverage ratios, leading to better credit ratings and increased bank credit.
How has the real estate sector's credit and financial metrics performed compared to other industries?
The real estate sector's credit and financial metrics have outperformed other major industries, showing a ‘V-shaped’ recovery post-Covid-19.
What is the current proportion of Gross Non-Performing Assets (GNPA) in the banks' loans to the construction industry?
The proportion of GNPA in the banks' loans to the construction industry has reduced to 3.1 per cent in March 2025, down from 23.5 per cent in March 2021.
How has the profitability of real estate companies changed from FY21 to FY25?
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.
What is the anticipated trend in the real estate sector's IPO activity?
The real estate sector has seen strong momentum in IPO activity, with seven IPOs raising more than Rs 76 billion until July 2025, and there is an anticipated upswing in SM REIT and REIT activity.
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