India’s stressed real estate sector could be turning a corner. According to CRISIL Ratings, debt recovery from stressed real estate assets is likely to rise significantly—from 22% in FY25 to 38% in FY26. This improvement is being driven by a combination of strong housing demand, an increase in new project launches, greater investor interest in nearly-complete projects, and strategic debt restructuring led by Asset Reconstruction Companies (ARCs).
Developers are planning to add about 2.5 million sq. ft. of new inventory in FY26. Demand remains especially strong in urban pockets like NCR, Mumbai Metropolitan Region (MMR), and Bengaluru. Some developers are also offering near-completion homes at slightly lower prices, helping boost sales momentum.
What’s more, around 40% of CRISIL-rated stressed projects are nearing completion, and at least a quarter of them are drawing new last-mile funding, particularly in the premium housing segment. Interestingly, mid-premium and premium projects make up nearly two-thirds of stressed assets but are expected to contribute up to 80% of the recoveries, thanks to sustained buyer interest. On the other hand, affordable housing projects are seeing slower pickup due to modest demand.
The role of ARCs has been pivotal. CRISIL notes that around 40% of projects in its rated Security Receipts (SRs) portfolio have gone through restructuring. By right-sizing debt and linking repayment terms to a project’s viability, ARCs have been able to increase chances of recovery—some even projecting full principal repayment over an 8-year horizon.
Looking ahead, CRISIL expects residential housing demand to grow 7–9% in FY26, which will further support the recovery trend. With stable prices and positive buyer sentiment post-pandemic, many previously distressed projects are starting to look attractive again to investors and developers alike.