Financial discipline drives momentum in India’s real estate sector, bank credit reports: Report
India’s real estate sector has greatly improved its financial discipline, thus gaining more credit from banks, credit rating upgrades and investor enthusiasm, according to a report on Tuesday.
Real estate management firm Colliers India reported that real estate companies have risen credit ratings due to higher operating margins, profit margins and utilization ratios.
It added that the real estate sector showed a “V-shaped” recovery following the COVID-19 pandemic, with its credit and financial indicators outperforming other major industries.
From FY21 to FY25, bank credit in the sector doubled from Rs 17.8 billion to Rs 35.4 billion, outperforming the average bank credit in other sectors, up 30%. Nearly one-fifth of bank credit deployments are in real estate, demonstrating lender confidence.
In addition, the quality of the loan has also been significantly improved. The proportion of total non-performing assets (GNPA) in banks’ loans to the construction industry has dropped significantly to 23.5% in March 2021 and 3.1% in March 2025.
“During FY25, 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 warehouse, retail, hospitality, etc.,” said Badal Yagnik, Chief Executive Officer, Colliers India.
Among the top 50 real estate companies, about 62% have a revenue rate of more than 23% of 23%, while 25% have a higher profit margin. Consistently strong demand, higher revenue realization and better operational efficiency can be attributed to the increased profitability of real estate companies. The report mentioned that the debt-to-equity ratio has also increased over the past five years.
This has led to the real estate sector outperforming the wider industry in terms of the number of credit rating upgrades. As a result, real estate companies are increasingly entering the stock market, which shows that investors are growing confidence in the industry. The real estate sector raised nearly Rs 13,800 crore in fiscal 24, 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.
