ARCs to see 5-7% higher recoveries from residential realty in FY25: CRISIL Ratings

Asset Reconstruction Companies (ARCs) in India are forecasted to witness an uptick in recovery rates for distressed residential realty projects, projected to rise to 16-18% by March 2025 from 11% in March 2024. CRISIL Ratings attributes this growth to robust demand, price appreciation in the housing property market, and heightened interest from investors and promoters. Recent amendments to the Insolvency and Bankruptcy Board of India (IBBI) regulations are anticipated to streamline the resolution of stressed real estate assets, enhancing overall recovery processes for ARCs. An analysis of the CRISIL Rating security receipts (SRs) portfolio, comprising approximately 70 stressed real estate projects with a saleable area of 66 million sq. ft and outstanding SRs of US$ 1.08 billion (Rs. 9,000 crore), supports this outlook.

Strong economic growth and robust residential demand across the top six cities are projected to drive a 10-12% growth in residential realty demand this fiscal year. Low unsold inventories across major micro markets are expected to aid ARCs in expediting the turnaround of stressed real estate projects supported by promoters or external investors. Senior Director at CRISIL Ratings, Mr. Mohit Makhija, notes that stressed realty projects are becoming increasingly viable for last-mile funding, with 33 million sq. ft of unsold inventory likely sold at appreciated market prices. Additionally, amendments in IBBI regulations specific to the real estate sector are anticipated to accelerate the resolution of stressed real estate projects through the Insolvency and Bankruptcy Code (IBC) for ARCs in the medium term.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.