India has emerged as the second-largest real estate private credit market in Asia-Pacific, contributing 36 per cent of regional fundraising between 2020 and 2024, according to Knight Frank’s Horizon Report: The Rise of Real Estate Credit in Asia-Pacific – Bridging the Gap. Private credit assets under management in India have risen from USD 0.7 billion in 2010 to USD 17.8 billion in 2023, supported by regulatory reforms, diversified funding structures, and sustained demand for flexible financing. India is expected to contribute 20–25 per cent of the region’s projected USD 90–110 billion private credit growth by 2028.

The report notes that India’s private credit expansion is driven by increasing reliance on non-bank capital amid evolving regulatory frameworks and a tighter banking environment. Institutional investors, including family offices and global private equity firms, are focusing on residential development, refinancing, and special situation financing.

Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “India’s emergence as a leading private credit market within Asia-Pacific reflects the country’s strong economic fundamentals, regulatory evolution, and deepening institutional participation. Developers are increasingly turning to structured and alternative financing to bridge capital gaps and meet rising urban housing demand.”

The report highlights that structured debt, last-mile funding, and special situation funds are unlocking stalled projects and supporting developers during cyclical liquidity pressures, drawing wider institutional participation.

Across APAC, private credit raised USD 11.2 billion between 2020 and 2024, a 40 per cent increase. Australia led with 40 per cent of total capital raised, followed by India at 36 per cent, South Korea at 11 per cent, and Japan at 5 per cent. Average fund sizes in the region have exceeded USD 100 million since 2022, reflecting stronger capital commitments.

Private credit is expanding as an alternative lending source due to demand for speed and flexibility, complementing traditional banking in markets including Australia, India, Hong Kong SAR, and South Korea. Family offices and institutional investors are increasing allocations, with private credit targeting returns of 3 to 6.5 per cent above benchmark rates and higher yields for riskier strategies.

Christine Li, Head of Research, Asia-Pacific, Knight Frank, said private credit lenders offer greater flexibility than banks, enabling higher loan-to-value ratios and fewer pre-sales requirements.

The report states that growth is likely to be selective, shaped by cyclical dislocations and the need for flexible capital solutions, with real estate credit positioned to offer attractive risk-adjusted returns amid elevated interest rate conditions.