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Asset reconstruction companies (ARCs) are seeing stronger recoveries in the real estate sector. According to Crisil Ratings with security receipt (SR) realisations improving to nearly 38% this financial year, up from 22% previously. This boost is mainly due to completion of stalled residential projects in NCR, MMR, and Bengaluru. Around 2.5 million sq ft of housing stock has been revived, with 40% nearing completion. Crisil noted that most recoveries are coming from mid to premium segments, supported by debt restructuring, last-mile funding, and flexible regulations enabling project-wise resolution.
Asset reconstruction companies are witnessing a surge in recovery of security receipts from previously stalled real-estate projects, with recovery rates climbing by around 16 percentage points to nearly 38?% during the current fiscal year. This turnaround is largely driven by brisk sales of newly completed units across NCR, MMR, and Bengaluru, supported by strategic debt restructuring moves. Advertisement
According to Crisil Ratings, approximately 40% of ARC monitored projects are now being completed, adding 2.5 million sq ft of fresh inventory this fiscal year, nearly 40% of which is nearing final delivery. Mid premium and premium housing segments are expected to contribute up to 80% of total recoveries, with affordability projects offering modest returns.
Crisil has observed that restructuring is now the most preferred strategy for stressed real estate projects. It enables developers to extend loan tenures, ease interest burdens, and most importantly, remain actively involved in the project, thus avoiding long-drawn insolvency proceedings. Debt restructuring, noted as the "preferred fix" by Crisil, is allowing developers to right-size outstanding liabilities, maintain cash flows for continued construction, and retain promoter involvement helping avoid lengthy insolvency procedures. Reports indicate that around two thirds of restructured projects reach 80-85% construction within about 2.5 years.
Importantly, ARCs are not operating in isolation. The funding ecosystem is responding positively as well. Close to 40% of these distressed projects have attracted last-mile capital from external investors. The rest have been supported either through promoter-led equity or through joint ventures, enabling faster progress on-ground. Developers have also become more willing to accept revised terms in order to expedite completions, especially with property prices firming up across urban markets.
The premium and mid-premium residential segments are proving to be the most rewarding from a recovery standpoint. These segments alone are expected to contribute 75-80% of the total recoveries, as buyers continue to prefer well-located, high-quality homes in the INR 80 lakh to INR 1.5 crore price bracket. In contrast, affordable housing projects have yielded relatively lower recoveries due to thinner margins and subdued resale appetite.
The Insolvency and Bankruptcy Board of India (IBBI) had previously amended regulations to allow for the resolution of individual real estate projects rather than mandating resolution at the company level. This change has helped streamline ARCs focus on viable standalone assets rather than being locked into broader, insolvent real estate portfolios.
Structural challenges such as disputed land titles, irregular approvals, and legacy governance lapses continue to pose hurdles for ARCs. Also, the unpredictability around demand cycles and localised oversupply in certain micro-markets may impact recovery timelines and pricing expectations. Despite these issues, industry experts believe the real estate stress resolution landscape is undergoing a pivotal transformation, underpinned by pragmatism and market-linked recovery models.
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