ARCs to See Boost in Realty Recovery Rates by 2025
ARCs to See Boost in Realty Recovery Rates by 2025
Real Estate

ARCs to See Boost in Realty Recovery Rates by 2025

Asset reconstruction companies (ARCs) in India are expected to achieve higher recovery rates for stressed residential realty projects, rising to 16-18% by March 2025 from 11% in March 2024, according to CRISIL Ratings. This increase is attributed to healthier demand, price appreciation in the housing market, and increased interest from investors and promoters.

Recent amendments to the Insolvency and Bankruptcy Board of India (IBBI) regulations are anticipated to expedite the resolution process for stressed real estate assets, further boosting ARC recovery rates.

CRISIL's analysis of nearly 70 stressed real estate projects, covering 66 million sq ft with outstanding security receipts of Rs 9,000 crore, underscores these projections. The top six cities are expected to see a 10-12% growth in residential realty demand, driven by healthy economic growth and low unsold inventories.

Approximately three-fourths of these projects became non-performing assets (NPAs) between 2019 and 2022, exacerbated by the Covid-19 pandemic. The remaining projects predate 2019 and struggled with liquidity issues due to weak demand.

Mohit Makhija, Senior Director at CRISIL Ratings, noted that stressed realty projects are becoming viable for last-mile funding due to increased market prices and healthy residential demand. He also highlighted the emergence of distressed asset credit funds as a factor improving last-mile funding accessibility.

The IBBI regulation amendments in February 2024 allow for the resolution of individual projects, separating them from their corporate entities. This change aims to fast-track the resolution process, addressing the slow pace observed previously, where only 8% of admitted cases were resolved under IBC.

CRISIL Ratings Director Sushant Sarode emphasized the importance of effective implementation of these amendments to enhance the Insolvency and Bankruptcy Code for real estate sector cases. This is expected to lead to more project-specific resolutions, maximizing value for all stakeholders.

Asset reconstruction companies (ARCs) in India are expected to achieve higher recovery rates for stressed residential realty projects, rising to 16-18% by March 2025 from 11% in March 2024, according to CRISIL Ratings. This increase is attributed to healthier demand, price appreciation in the housing market, and increased interest from investors and promoters. Recent amendments to the Insolvency and Bankruptcy Board of India (IBBI) regulations are anticipated to expedite the resolution process for stressed real estate assets, further boosting ARC recovery rates. CRISIL's analysis of nearly 70 stressed real estate projects, covering 66 million sq ft with outstanding security receipts of Rs 9,000 crore, underscores these projections. The top six cities are expected to see a 10-12% growth in residential realty demand, driven by healthy economic growth and low unsold inventories. Approximately three-fourths of these projects became non-performing assets (NPAs) between 2019 and 2022, exacerbated by the Covid-19 pandemic. The remaining projects predate 2019 and struggled with liquidity issues due to weak demand. Mohit Makhija, Senior Director at CRISIL Ratings, noted that stressed realty projects are becoming viable for last-mile funding due to increased market prices and healthy residential demand. He also highlighted the emergence of distressed asset credit funds as a factor improving last-mile funding accessibility. The IBBI regulation amendments in February 2024 allow for the resolution of individual projects, separating them from their corporate entities. This change aims to fast-track the resolution process, addressing the slow pace observed previously, where only 8% of admitted cases were resolved under IBC. CRISIL Ratings Director Sushant Sarode emphasized the importance of effective implementation of these amendments to enhance the Insolvency and Bankruptcy Code for real estate sector cases. This is expected to lead to more project-specific resolutions, maximizing value for all stakeholders.

Next Story
Infrastructure Urban

Global Rare Earth Supply Chains Diversify Away from China

In response to the rising global demand for rare earths critical for producing everything from electric vehicles to wind turbines, supply chains are undergoing a significant realignment away from China. Historically dominant in rare earth production, China's recent policies and geopolitical tensions have prompted Western nations and other stakeholders to seek alternative sources and bolster local capabilities. Rare earth processing involves two essential stages: initial extraction and subsequent refining into individual oxide compounds used to manufacture magnets essential in various industri..

Next Story
Infrastructure Urban

Coal India, US Firm to Explore Argentine Lithium

State-run Coal India Ltd is collaborating with a US company to explore lithium blocks in Argentina, a critical step in securing supplies of the essential battery material, according to an Indian source with direct knowledge of the matter. This initiative is part of India's participation in the US-led Minerals Security Partnership (MSP), which New Delhi joined last year to ensure a steady supply of minerals necessary to meet its zero-carbon objectives. As part of the MSP, India was invited to engage in 20-25 critical minerals projects, with four already identified by the Indian government. Indi..

Next Story
Infrastructure Energy

India's Coal Consumption Set to Surge Amid Hydroelectricity Shortfall

Amid a significant drop in hydroelectricity production caused by inadequate rainfall, India is gearing up to increase its coal consumption to satisfy rising power demands, according to S&P Global Commodity Insights. This shortfall in hydroelectric power is anticipated to perpetuate India's reliance on coal imports. During the fiscal year 2023-24, India's coal production approached the 1 billion metric ton milestone, reflecting the government's strategy to lessen dependency on imported coal. Nonetheless, the country has already imported approximately 85 million metric tons of thermal coal in 20..

Hi There!

"Now get regular updates from CW Magazine on WhatsApp!

Join the CW WhatsApp channel for the latest news, industry events, expert insights, and project updates from the construction and infrastructure industry.

Click the link below to join"

+91 81086 03000

Join us Telegram