India's Real Estate Credit Market Thrives with Private Credit, Driving 36% of APAC Fundraising

According to Knight Frank's Horizon Report: The Rise of Real Estate Credit in Asia-Pacific – Bridging the Gap, India has emerged as a top private credit market in real estate within the Asia-Pacific region. The country has accounted for 36% of the total fundraising in the region from 2020 to 2024.

The report highlights that India's private credit assets under management (AUM) have seen a dramatic increase, growing from USD 0.7 billion in 2010 to USD 17.8 billion in 2023. This growth is primarily attributed to the market's rapid institutionalization and growing investor confidence. India is projected to contribute 20–25% of the total regional private credit expansion of USD 90–110 billion by 2028, supported by regulatory changes, diversified funding structures, and ongoing demand for flexible financing.

The APAC real estate private credit market has raised USD 11.2 billion from 2020 to 2024, marking a 40% increase from the USD 8 billion raised in 2015–2019. Australia has been the largest contributor, making up 40% of the total capital raised, indicating the dominance of mature markets. However, India's contribution has been steadily increasing due to regulatory reforms, developer demand, and investor interest.

The APAC region is expected to raise private credit to the tune of USD 90–110 billion between 2025 and 2028. India is anticipated to make up 20–25% of this total, while Australia is expected to contribute nearly 50% due to stringent bank lending policies and growing demand for flexible financing structures.

Developers' increasing reliance on non-bank capital in the face of tighter regulations and more selective lending by banks has been a key driver of private credit's rapid growth. Institutional investors, such as family offices and global private equity firms, are eager to capitalize on opportunities in residential development, refinancing, and special situations.

Shishir Baijal, Chairperson and Managing Director of Knight Frank India, commented, “Developers are increasingly turning to structured and alternative financing to bridge capital gaps and meet rising urban housing demand. As interest rates globally remain elevated, private credit offers a compelling avenue for investors seeking higher yields with tangible underlying assets.”

The bank credit in India has experienced a compound annual growth rate (CAGR) of 11.6% between 2015 and 2025, reaching Rs 182.4 trillion. The housing sector has been the main growth driver, with a CAGR of 16.9% and reaching Rs 30.1 trillion. The commercial real estate sector has also seen a 12.2% yearly growth rate, reaching Rs 5.3 trillion, driven by economic expansion and government-led infrastructure and housing initiatives.

Private credit has expanded beyond traditional development finance, with more structured debt, last-mile funding, and special situation funds being used to revive stalled projects and provide liquidity to developers during cycles. Investor engagement in India has evolved to include both performing credit and distressed or special situation assets. Foreign portfolio investors have traditionally been at the forefront, while SEBI-regulated Category II Alternative Investment Funds (AIFs) have transformed the game by offering high returns, longer horizons, and regulatory flexibility.

Lalit Parihar, Managing Director of the Dholera-based real estate company Aaiji Group, noted, “India’s ascent as one of the most dynamic real estate private credit markets in Asia-Pacific reflects the deepening maturity and resilience of the sector. The rapid growth in private credit AUM—from under a billion dollars a decade ago to nearly USD 18 billion today—demonstrates strong investor confidence and the success of regulatory reforms that have enhanced transparency and broadened financing avenues. As India is poised to contribute up to a quarter of the region’s private credit growth by 2028, we see tremendous opportunity for well-capitalized, forward-thinking developers. At our company, we believe this evolving credit landscape will enable us to accelerate high-quality development, strengthen partnerships with institutional investors, and continue delivering long-term value to our stakeholders.”

The residential sector has been the primary driver of private credit investments over the past decade, accounting for more than half of the investments in most years. This trend has continued even during housing downturns, with the residential segment attracting more than half of the private credit investments due to flexible lending terms. Offices accounted for 17% of total investments, industrial projects 5% (USD 852 million), retail 2% (USD 251 million), and the rest spread across diversified and township projects.

Private credit is transforming the Indian real estate market into a more sustainable and client-friendly one by offering 12–21% internal rate of return (IRR) compared to conventional instruments. Different structures like mezzanine debt, bridge loans, and preferred equity continue to revitalize neglected segments, such as affordable housing.

Harry Chaplin Rogers, Director of International Capital Markets at Knight Frank India, explained, “Private credit has become a viable option for India’s real estate developers, enabling faster access to tailored capital for land acquisition, construction, and refinancing. As more developers opt for these flexible structures over traditional funding options, investor appetite is expanding and processes are becoming more streamlined, ultimately positioning private credit as a key driver of the sector’s next growth phase.”

AIFs registered have grown from 143 in March 2015 to 1,532 in March 2025, a 52% CAGR over the ten years, indicating the gradual participation of investors and the maturity of the market. Knight Frank concludes that private credit is no longer a niche but a widely accepted financing source, providing essential support to developers and high returns to investors. This makes it a key factor in the sector's growth in India's real estate market over the next ten years.