The sector’s access to credit has improved significantly in absolute terms, though with evolving dynamics amongst banks and NBFCs. While the share of banks in overall credit exposure to Indian realty has increased notably and NBFCs have become relatively averse to real estate exposure post the 2018 crisis, the outstanding loan book for both banks and NBFCs has grown significantly in the last decade.
Gross bank credit in India has grown significantly, from INR 109.5 lakh crore in FY 2021 to INR 182.4 lakh crore in FY 2025. Bank credit in the real estate sector has impressively doubled in the same period, from INR 17.8 lakh crore to INR 35.4 lakh crore. Importantly, real estate now accounts for close to one-fifth of the bank credit deployment in the country, signaling growing lender confidence in the sector.
In addition to increased lending to the real estate sector, the quality of loans has also improved significantly. The proportion of Gross Non-Performing Assets (GNPA) in the construction industry loan book of banks has significantly reduced from 23.5% in March 2021 to 3.1% in March 2025.
Profitability and leverage ratios improve
Increasing appetite for real estate lending by financial institutions has primarily stemmed from the financial prudence displayed by the sector. In fact, the top 50 listed real estate companies have shown impressive improvements in terms of profitability, cash flow realization, and balance sheet performance over the last five years. One of the most significant trends is the improvement in profitability metrics – 62% of the top 50 listed real estate companies had higher profitability margins at the end of FY 2025 as compared to the 23% share in FY 2021. Consistent strong demand, higher revenue realization, and better operating efficiencies can be attributed to the increasing profitability of real estate companies.
Additionally, the debt-to-equity ratio, a critical indicator of financial discipline, has shown consistent improvement over the past five years. More than 60% of the leading real estate companies in India have comfortable debt levels, which is reflected in the debt-to-equity ratio of less than 0.5 in FY 2025. This is particularly noteworthy considering that 43% of the leading real estate companies were low-leverage companies in FY 2021. Financial prudence at the Special Purpose Vehicle (SPV) level has in a way culminated into comfortable debt levels at the consolidated level. Moreover, it highlights a deliberate strategy amongst large developers to deleverage and enhance capital as well as operational efficiency.
Creditworthiness of the real estate sector Improves
Most economic sectors in India have rebounded strongly post-pandemic. However, the pace and extent of recovery in the real estate sector has been comparatively more pronounced than in other industries. This is reiterated by a higher proportion of credit rating upgrades in Indian real estate in recent years. In fact, the real estate sector has outperformed the broader industry on credit quality metrics, with a leading Credit Rating Agency (CRA) reporting 23% of upgrades in its rated real estate portfolio versus a mere 1% of downgrades during the second half of FY 2025. The percentage of rating upgrades and downgrades across industries from the same CRA meanwhile stood at 14% and 6% respectively in the same period.
While the extremely high number of upgrades vis-à-vis downgrades in H2 of FY 2025 in Indian real estate may rationalize over the next few years, it is still expected to outperform most economic sectors, driven by its inherent fundamentals. Rising revenues, improving operating and profitability margins, and steady debt deleveraging underscore the adoption of more sustainable and disciplined financial practices in Indian real estate, reinforcing its position as one of the promising sectors across the corporate landscape.
Real estate players are increasingly turning to public markets
In 2024 alone, India witnessed close to 160 fresh public issuances across sectors, comfortably outpacing issuances in 2023. Remarkably, the real estate sector saw 9 IPOs in 2024, raising nearly INR 138 billion - almost double the amount raised in the previous year. Since 2021, 30 IPOs have collectively raised close to INR 400 billion into India’s real estate sector. Heightened activity in the equity markets has continued into 2025 as well. The year has already seen 92 IPOs, including 7 real estate IPOs till date. Interestingly, real estate IPOs are expanding into newer categories such as flex spaces, with leading operators scaling their portfolios across cities and fast-tracking their public listing plans. Moreover, the introduction of REIT and SM-REIT offerings is democratizing real estate ownership for the retail investor. In the near to mid-term, several real estate companies, including Real Estate Investment Trusts (REITs), Small & Medium (SM)-REITs, hospitality players, residential developers, flex space operators etc. are lining up for their IPOs with the regulator.
