ARCs to see recoveries improve from stressed residential projects

economictimes.indiatimes.com:

ARC) are expected to see an increase in cumulative recovery rates of stressed residential real estate projects by 5 to 7 percentage points, with demand underpinning the return to solvency for several projects previously stuck with unsold inventory.

Recovery rates are expected to touch 16-18% as of March 2025, from 11% a year ago, said a report by Crisil Ratings.

Rising prices in residential real estate, healthy demand and better investor and promoter interests should aid the recovery. Crisil Ratings analysed the portfolio of about 70 stressed assets with outstanding security receipts of ₹ 9,000 crore.

ARCs typically offer security receipts in lieu of future recoveries and subsequent payments to the original lender to the property developer concerned.

«Stressed realty projects are becoming viable for last-mile funding as about 33 million sq ft of unsold inventory for projects analysed is likely to be sold at appreciated market prices. This is because of a significant increase in prices over the last two fiscals and healthy demand for residential real estate,» said Mohit Makhija, senior director at Crisil Ratings.

Sector-specific Insolvency and Bankruptcy Code (IBC) regulations, amended in February, are expected to quicken the resolution of stressed residential real estate projetcs.
These amendments allow the resolution of individual projects by delinking them from the entire corporate entity that involves multiple projects and group inter-linkages.