Mumbai: Loan recoveries from stressed residential realty projects are set to increase in the current financial year due to higher property prices as well as changes in regulations, a report said on Monday.
Domestic rating agency CRISIL said in a report that the bad loan recovery rate is estimated to reach 16-18 per cent at the end of FY2025, from 11 per cent as on March 31, 2024.
"This will be driven by healthy demand and price appreciation seen in residential real estate and improved viability of stressed projects due to greater investor and promoter interest in reviving such projects," the agency said.
It said the recent amendments in Insolvency and Bankruptcy Board of India (IBBI) rules for real estate projects should also strengthen the resolution of stressed real estate assets in the medium term.
The agency said while arriving at the estimate it analyzed the performance of its portfolio, which included security receipts worth Rs 9,000 crore from 70 stressed realty projects with a salable area of 66 million sq ft.It said residential realty demand is set to grow by 10-12 per cent due to healthy economic growth and strong demand in the housing segments in the top six cities.
Additionally, it said the undersold inventory in key micro markets will help ARCs (asset reconstruction companies) complete stressed real estate projects faster with the support of promoters or external investors.
Three-quarters of the projects analyzed became non-performing assets (NPAs) between 2019 and 2022, hit by declining sales and slow collections during the COVID-19 pandemic. It said the remaining NPAs are pre-2019 projects that faced liquidity problems due to weak demand.
Mohit Makhija, senior director, CRISIL, said the unsold inventory of 33 million sq ft is likely to be sold at appreciable market value due to the significant rise in prices over the last two financial years and healthy demand for residential real estate.“The emergence of the distressed asset credit fund is expected to improve access to last-mile funding for project completion, thereby supporting faster restructuring of debt by promoters with ARCs,” he said.
The agency further said that the amendments made in the insolvency rules in February this year have made it possible to resolve individual projects by separating the entire corporate entity with multiple projects and group inter-linkages.
Speaking about the need for amendments, it said only 8 per cent of sanctioned cases under the IBC have been resolved and loans worth Rs 40,000 crore are stuck in 100 realty cases pending for more than two years.
Its director Sushant Sarode said more project-specific proposals are expected to be accepted under the Insolvency Code and will help achieve value maximization for all stakeholders.
Domestic rating agency CRISIL said in a report that the bad loan recovery rate is estimated to reach 16-18 per cent at the end of FY2025, from 11 per cent as on March 31, 2024.
"This will be driven by healthy demand and price appreciation seen in residential real estate and improved viability of stressed projects due to greater investor and promoter interest in reviving such projects," the agency said.
It said the recent amendments in Insolvency and Bankruptcy Board of India (IBBI) rules for real estate projects should also strengthen the resolution of stressed real estate assets in the medium term.
The agency said while arriving at the estimate it analyzed the performance of its portfolio, which included security receipts worth Rs 9,000 crore from 70 stressed realty projects with a salable area of 66 million sq ft.It said residential realty demand is set to grow by 10-12 per cent due to healthy economic growth and strong demand in the housing segments in the top six cities.
Additionally, it said the undersold inventory in key micro markets will help ARCs (asset reconstruction companies) complete stressed real estate projects faster with the support of promoters or external investors.
Three-quarters of the projects analyzed became non-performing assets (NPAs) between 2019 and 2022, hit by declining sales and slow collections during the COVID-19 pandemic. It said the remaining NPAs are pre-2019 projects that faced liquidity problems due to weak demand.
Mohit Makhija, senior director, CRISIL, said the unsold inventory of 33 million sq ft is likely to be sold at appreciable market value due to the significant rise in prices over the last two financial years and healthy demand for residential real estate.“The emergence of the distressed asset credit fund is expected to improve access to last-mile funding for project completion, thereby supporting faster restructuring of debt by promoters with ARCs,” he said.
The agency further said that the amendments made in the insolvency rules in February this year have made it possible to resolve individual projects by separating the entire corporate entity with multiple projects and group inter-linkages.
Speaking about the need for amendments, it said only 8 per cent of sanctioned cases under the IBC have been resolved and loans worth Rs 40,000 crore are stuck in 100 realty cases pending for more than two years.
Its director Sushant Sarode said more project-specific proposals are expected to be accepted under the Insolvency Code and will help achieve value maximization for all stakeholders.
