The report highlights that India’s private credit assets under management (AUM) have seen an exponential jump from USD 0.7 billion in 2010 to USD 17.8 billion in 2023, marking rapid institutionalisation and increasing investor confidence. Driven by regulatory reforms and growing demand for alternative financing, India is projected to contribute 20–25% of the expected USD 90–110 billion regional private credit growth by 2028.

Private Credit Surges as Developers Shift to Non-Bank Capital

Knight Frank notes that India’s private credit boom has been fuelled by developers seeking structured funding solutions amid tighter banking norms and evolving regulatory landscapes. Institutional investors — including family offices and PE firms — are actively deploying capital into residential development funding, refinancing, and special situation financing.

“India’s emergence as a leading private credit market reflects strong fundamentals, regulatory evolution, and deepening institutional participation,” said Shishir Baijal, Chairman & MD, Knight Frank India.
He added that private credit now provides developers with flexibility and speed, especially amid rising demand for urban housing and elevated interest rates globally.

Private Credit Expands Beyond Traditional Real Estate Loans

The segment is evolving to address market inefficiencies and liquidity challenges:

• Structured and last-mile financing helping revive stalled projects
• Special situation funds tackling developer distress cases
• Broader investor participation improving stability

Analysts say this diversification is creating resilience and attracting wider institutional interest.

APAC Private Credit Raised USD 11.2 Billion Between 2020–2024

Across Asia-Pacific, real estate private credit fundraising totalled USD 11.2 billion, marking a 40% rise, demonstrating the region’s growing relevance in global alternative lending.

Regional Distribution of Fundraising

• Australia – 40% (largest contributor)
• India – 36%
• South Korea – 11%
• Japan – 5%
• Remaining APAC markets – 8%

Australia currently holds USD 50 billion in private credit AUM, equivalent to 16% of total CRE lending.

“Private credit is becoming a preferred financing route for developers seeking speed and flexible structures,” said Simon Mathews, Director, Capital Advisory, Knight Frank.

Key Investment Themes Emerging in APAC Private Credit

• Development financing where banks are retreating due to Basel III constraints
• Bridge & refinancing amid valuation corrections in Australia & Hong Kong SAR
• Value-add & ESG upgrades including retrofits and office conversions
• New economy assets such as data centres, logistics, and build-to-rent housing

Family Offices Driving Growth Momentum

Asia-Pacific continues to attract increasing allocations from UHNWIs and family offices:

• Global family office wealth stands at USD 3.1 trillion
• 37% plan to increase indirect real estate exposure
• Private credit allocations—highest demand among asset classes

Private credit strategies are now targeting 3% to 6.5% returns above benchmark rates, with special situations delivering double-digit returns.

Outlook: Attractive Risk-Adjusted Returns Despite Challenges

While risks remain around liquidity and regulation, Knight Frank expects private credit to expand further due to high-return potential and institutional maturity.

“This is the strongest environment for private credit in more than a decade,” Simon added.

Also Read: India Leads APAC Real Estate Investments with 88% Growth in H2 2024

The post India Ranks 2nd in APAC Real Estate Private Credit Fundraising; Poised to Capture 25% of Growth by 2028 appeared first on Square Feat India.

Real Estate Credit: A Growing Alternative Investment Segment
Unlike traditional equity or real estate development funds, real estate credit funds focus on secured debt instruments issued by developers. Investors earn fixed or floating interest while the underlying projects provide collateral security, reducing capital risk. In India, this segment has attracted attention due to consistent cash yields, low capital loss histories, and predictable returns, even in periods of market volatility.

Sundaram Alternates Fund II: Key Highlights

• Portfolio Focus: Fully secured, high-yield debentures concentrated in key South Indian micro markets.
• Risk Management: Emphasis on de-risked brownfield projects, disciplined credit underwriting, and sponsor equity of over 15% for every project.
• Track Record: Zero capital losses even through 2019–2023, including the COVID-19 waves and NBFC liquidity crises.
• Returns: Annual cash yield for investors ranged 15–16%, with no missed quarterly distributions.

This closure marks SA’s 38th full exit and over 10 partial exits over eight years, totaling ~₹2,600 crores, showcasing the resilience of structured real estate debt as an asset class. Across its four real estate credit funds, the platform has deployed over ₹4,200 crores across 74 deals, delivering contracted IRRs of 19%.

Broader Context: Opportunities in Indian Real Estate Credit
The growth of private real estate credit reflects wider trends in India:

• Increasing institutionalisation of private credit, with investors seeking risk-adjusted returns over traditional fixed-income instruments.
• Developers looking for alternate financing channels due to tighter bank lending norms and regulatory oversight.
• Predictable quarterly cash flows and secured debt structures make these funds attractive for conservative and high-net-worth investors alike.

Experts note that while real estate credit funds offer strong returns, investors should carefully evaluate fund underwriting, collateral quality, and sponsor credibility. Diversification across projects and geographies remains key to mitigating concentration risk.

The Big Picture
Funds like SA RE Credit Fund II demonstrate that structured real estate credit can deliver robust, risk-adjusted returns even in challenging market cycles, bridging the gap between traditional fixed-income and equity-linked real estate investments. With the private credit ecosystem maturing, investors now have multiple avenues to earn consistent yields while benefiting from collateral-backed security — a combination increasingly attractive in today’s low-interest environment.

Also Read:

The post From Debt to Development: How Real Estate Credit Funds Are Changing the Investment Game in India appeared first on Square Feat India.