Debt recovery in stressed realty projects to rise 1,600 bps this fiscal: Crisil Ratings
For
asset reconstruction companies
(ARCs), the cumulative recovery rate of security receipts (SRs) issued towards
stressed real estate projects
will increase by 16 percentage points to 38% this fiscal, as per rating agency Crisil. The improvement will ride on robust sales of new units in these projects, backed by steady demand in the
residential real estate
sector, on the back of strategic debt restructuring facilitated by the
ARCs
. These findings are based on a
Crisil Ratings
analysis of 70 stressed real estate projects located in NCR, MMR and Bangalore micro-markets, with SRs issued worth Rs 10,800 crore.
Majority of these projects were trapped in a spiralling debt cycle due to falling sales, slow collections and lack of funds to complete construction — most of which are addressed today. Increase in real estate prices and rising demand in the above micro-markets post-pandemic resulting in ramping up of sales have turned these projects viable for funding by external investors, the rating agency said in a note.
As per Crisil, demand growth of 7-9% expected in fiscal 2026 for residential real estate in the three micro-markets mentioned above will support the sales for these stressed projects as well. About two-thirds of the rated projects are in the mid-premium segment and above, which are expected to contribute up to 80% of recovery for ARCs driven by stable demand in fiscal 2026. The remaining projects are in the affordable segment which is likely to see modest demand and will contribute lower to recoveries this fiscal.
'Overall, ARCs are expected to see recoveries in stressed real estate projects surge as developers aim to add 2.5 million square feet of inventory this fiscal," said Mohit Makhija, Senior Director,
Crisil
Ratings. "With 40% 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. Incentivising sales at marginally below market prices of near-completion inventory is expected to accelerate sales in these projects.'
Crisil says that restructuring of debt has emerged as the preferred resolution strategy for stressed real estate projects, because ARCs can bring down the debt to sustainable levels with an initial moratorium on payments, allowing developers to redirect project cash flow towards construction of units in these projects.
Another reason is that restructuring is also favoured by ARCs due to inherent issues in the real estate sector such as two-fold ownership of land and development rights, multiple special purpose vehicle structures with cross-collateralisation and several layers of approval from state authorities, as per Crisil.
While restructuring ensures promoters have skin in the game and resolutions are faster, these issues make other strategies such as the Insolvency & Bankruptcy Code (IBC), enforcement and liquidation more time-consuming and thus leading to lower recovery.
About 40% of the stressed real estate projects in the Crisil Ratings SR portfolio has undergone restructuring as the primary mode of resolution, resulting in expected nominal recoveries of up to the full principal amount of debt acquired over an 8- year trust life.
'Debt restructuring of stressed projects has significantly improved the viability of projects by right-sizing debt to sustainable levels," said Sushant Sarode, Director, Crisil Ratings. "Construction progress for the stalled projects rated by us is estimated at 80-85% on average within 2.5 years of restructuring. This construction is largely funded by project cash flow, thereby indicating strong sales velocity. The right balance of sustainable debt and steady demand momentum will help fructify efforts of ARCs to turn around some of these stressed projects.'
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
38 minutes ago
- Time of India
Fly ash brick prices up due to raw material costs
Indore: A significant increase in raw material costs led to a price hike of 0.50 paise per piece in fly ash bricks across Indore, lifting the overall building costs for homeowners and construction companies. The surge primarily stems from the rising costs of stone crusher dust and other essential materials used in the manufacturing process. The revised cost of fly ash bricks in Indore is Rs 6.50 per piece. Now the cost of a small truckload carrying 2,000 flyash bricks will be dearer by Rs 1,000. Vijay Gandhi, a builder and member of Confederation of Real Estate Developers' Associations of India (CREDAI), Indore said, "Any jump in the input cost directly impacts the building cost. In Indore fly ash is used in around 30-40 per cent projects and red bricks are used widely in Indore due to its easy availability." The robust manufacturing base has established Indore as a significant hub for fly ash brick production in the region. According to industry data, Indore's fly ash brick manufacturing units produce approximately 20 lakh pieces daily. The majority of this production serves the local market, with most supplies being consumed within the city and a 20-kilometre radius. Abhishek Purohit, vice president, Fly Ash Brick Manufacturers Cooperative Society Ltd, said, "The association members unanimously decided in a meeting that due to the rising costs of gravel and stone crusher dust used in the production of fly ash bricks, the price per brick will be increased by 0.50 paise. These revised rates will be implemented immediately." The city hosts over 200 fly ash brick manufacturers, forming a substantial industrial segment. These units collectively require around 6,000 tonnes of fly ash per day to maintain their production levels. Industry experts suggest that this price increase could impact ongoing and planned construction projects in the area. Small-scale builders and individual homeowners might need to revise their budgets to accommodate these higher material costs. "Local manufacturers are working to maintain steady production levels while managing increased operational costs, but this has resulted in squeezed margins. Fly ash bricks offer an eco-friendly alternative to traditional clay bricks, and despite the price increase, these bricks remain an essential building material," said Gaurav Mohta, president, of the association. Fly ash manufacturers highlighted challenges related to logistics and timely transportation of fly ash to end-users.
Time of India
an hour ago
- Time of India
CM flying squad to probe MCM sanitation contract
Gurgaon: The CM flying squad has initiated an investigation into MCM's sanitation contract with Akanksha Enterprises, demanding documents such as tender details, contractor payments, and supervision records. The probe follows MCM's recent Rs 9.2 crore penalty on the contractor for inadequate service delivery. The contract, initially valid till Feb 2025, was extended to May. "A letter was sent to the MCM officials seeking details of the contract so that the CM flying squad could probe the matter. The civic body was given a week's time to probe the matter," said a ULB official privy to the matter. The contractor submitted an invoice of Rs 13.2 crore for services rendered during these three months. The representative of Akanksha Enterprises, Shishpal Rana, could not be reached despite repeated attempts by TOI. In April, the company also faced a Rs 4.3 crore penalty, during which they alleged bribery among senior MCM officials and payment delays, leading to the transfer of the then MCM commissioner. A sanitation standing committee reviewed the work of the agency between Feb 20, 2025, and May 19, 2025. A meeting was held on June 4 when the committee recommended deducting over Rs 9.17 crore from the agency's Rs 13.17 crore bill, approving only Rs 3.9 crore for payment. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Giao dịch vàng CFDs với mức chênh lệch giá thấp nhất IC Markets Đăng ký Undo According to state govt-sanctioned estimates derived from central public health and environment engineering standards (SWM manual of CPPHEO norms, 20216) and the project's request for proposal (RFP), the agency was required to supply 1,997 personnel, 96 tractor trolleys, 468 rickshaw carts, and four earthmovers for sweeping roads in the MCM area. The urban local bodies (ULB) department stipulated that all SWM payments would be processed via the SWM monitoring portal starting Jan 2025. The committee observed a significant gap between the actual deployment figures shown on the SWM portal. It revealed personnel shortfalls of 1,315 in Feb, 1,355 in March, 1,533 in April, and 1,284 in May. Regarding equipment deployment, the committee's review showed that the agency provided only 101 rickshaw carts instead of the required 468 and merely 38 tractor trolleys against the specified 94, indicating substantial shortages in equipment provision for their work in the MCM area for three months.
Time of India
an hour ago
- Time of India
Tour operator told to refund elderly couple for cancelled tour in Covid times
Ahmedabad: A consumer commission here has ordered a tour operator to refund the full amount with interest, along with Rs 55,000 compensation, to an elderly couple whose tours to Japan and Europe could not take place due to the Covid-19 pandemic. Tired of too many ads? go ad free now The couple was reluctant to go to the UK, Ireland, and Scotland upon the operator's insistence three years later. This case involved Asha and Yogesh Doshi, residents of the Ambawadi area, who paid Rs 5.30 lakh in 2019 to Mumbai-based Neem Holidays Pvt Ltd for two tours — Japan and Europe in 2020. Due to the Covid pandemic, the tours were cancelled. When normalcy returned, they requested the same tour package, but the operator could not arrange it. Considering that people were still reeling under financial stress due to Covid, the couple did not demand their money back. In 2022, the tour operator offered them a 13-day package for Australia. They agreed and paid Rs 10,000 extra, but this did not take place. A year later, the operator offered the couple a tour to the United Kingdom. The couple refused this trip, yet their tickets were booked. They requested the company not to force them to accept this package tour and demanded their money back. As the operator did not respond, the couple sued it with the District Consumer Dispute Redressal Commission, Ahmedabad City to get the refund. The operator's lawyer appeared, but the reply was not filed. The commission said that since the money was lying with the operator, the complainants did not have any choice but to agree to the unreasonable request. However, compelling them for another tour against their wish was harassment. Tired of too many ads? go ad free now "The complainant's money has been wrongfully withheld by the opponent, and therefore the complainants are entitled to receive the full money of the package tour from the opponent," it said. The commission ordered the operator to return Rs 5.40 lakh with 8% interest, along with Rs 55,000 extra towards compensation for causing "physical harassment and mental agony" and towards the expenditure the couple incurred on litigation.
