Recovery in Stressed Real Estate Projects Set to Improve in FY26: Crisil Ratings
Crisil Ratings predicts a significant improvement in debt recovery for stressed real estate projects in FY26, driven by robust sales and strategic debt restructuring.
Real EstateDebt RecoveryArcsCrisil RatingsStressed ProjectsReal Estate MumbaiJun 16, 2025
Security Receipts (SRs) are financial instruments issued by ARCs to purchase distressed assets from lenders. The cumulative recovery rate refers to the total gross recoveries to the SRs issued. Crisil has identified around 70 stressed real estate projects across the Mumbai Metropolitan Region (MMR), National Capital Region (NCR), and Bengaluru, with SRs worth approximately Rs 10,800 crore.
The analysis suggests that the rise in property prices and the anticipated increase in real estate sales by 7-9 percent in FY26 have addressed previous issues in stressed projects, such as slow sales velocity and a lack of capitalization among developers. Strong sales have also sparked renewed interest from investors in extending last-mile funding to complete these projects, particularly in the premium segment.
“With around 40 percent of rated projects nearing completion, there is renewed investor interest in at least one-fourth of these projects for last-mile funding, particularly in the premium segment. Incentivizing sales at marginally below market prices of near-completion inventory is expected to accelerate sales in these projects,” said Mohit Makhija, Senior Director at Crisil Ratings.
Approximately two-thirds of the rated projects fall into the mid-premium segment (between Rs 80 lakh to Rs 1.5 crore), which is expected to contribute around 80 percent of recoveries by ARCs in the ongoing fiscal. The remaining projects belong to the affordable segment.
ARCs are also exploring various methods for debt restructuring, such as providing an initial moratorium for developers to redirect cash flows towards project completion. “Construction progress for the stalled projects rated by us is estimated at 80-85 percent on average within two and a half years of restructuring. This construction is largely funded by project cash flow, indicating strong sales velocity. The right balance of sustainable debt and steady demand momentum will help ARCs turn around some of these stressed projects,” added Sushant Sarode, Director at Crisil Ratings.
Last week, JC Flowers ARC successfully exited the stalled project One Marina in south Mumbai through a restructuring process. Real estate developer Ashwin Sheth Group purchased a 50 percent stake in the project, settling the loan that the ARC had acquired from Yes Bank. Asia-focused fund PAG provided around Rs 540 crore to Ashwin Sheth Group to facilitate the process.
This positive outlook for the real estate sector highlights the potential for significant improvements in debt recovery and project completion, driven by strategic financial management and market conditions.
Frequently Asked Questions
What are Security Receipts (SRs)?
Security Receipts (SRs) are financial instruments issued by Asset Reconstruction Companies (ARCs) to purchase distressed assets from lenders. The cumulative recovery rate refers to the total gross recoveries to the SRs issued.
How many stressed real estate projects has Crisil identified?
Crisil has identified around 70 stressed real estate projects across the Mumbai Metropolitan Region (MMR), National Capital Region (NCR), and Bengaluru, with SRs worth approximately Rs 10,800 crore.
What factors are driving the improvement in debt recovery for stressed projects?
The improvement is driven by strong sales in key residential real estate markets, strategic debt restructuring by ARCs, and increased investor interest in last-mile funding for near-completion projects.
What segment of the real estate market is expected to contribute the most to recoveries?
Approximately two-thirds of the rated projects fall into the mid-premium segment (between Rs 80 lakh to Rs 1.5 crore), which is expected to contribute around 80 percent of recoveries by ARCs in the ongoing fiscal.
What is the role of debt restructuring in improving project completion rates?
ARCs are exploring various methods for debt restructuring, such as providing an initial moratorium for developers to redirect cash flows towards project completion. This has helped in achieving an average construction progress of 80-85 percent within two and a half years of restructuring.
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