Mumbai, Nov 24th: India has emerged as one of the most dynamic real estate private credit markets in the Asia-Pacific region, ranking 2nd and contributing 36% of the region’s private credit fundraising between 2020 and 2024, according to Knight Frank’s latest Horizon Report: The Rise of Real Estate Credit in Asia-Pacific – Bridging the Gap.
The report reveals that India’s private credit assets under management (AUM) have grown from USD 0.7 billion in 2010 to USD 17.8 billion in 2023, highlighting the rapid institutionalisation of the market and rising investor confidence. Backed by regulatory reforms, innovative funding structures, and increasing demand for flexible capital, India is projected to account for 20–25% of the region’s anticipated USD 90–110 billion private credit growth by 2028.
Knight Frank notes that developers’ growing reliance on non-bank financing—amid evolving regulations and tighter bank lending—has accelerated the expansion of private credit. Global private equity firms and family offices are increasingly tapping into the segment for its attractive risk-adjusted returns, especially in residential development, refinancing, and special situation funding.
India’s Market Momentum
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said:
“India’s rise as a leading private credit market is driven by strong economic fundamentals and deepening institutional participation. Structured and alternative financing are helping bridge capital gaps for developers and support the rising urban housing demand. With global interest rates remaining high, private credit offers compelling opportunities backed by robust underlying assets.”
The report also highlights how structured debt, last-mile funding, and special situation investments are increasingly critical in unlocking stalled projects and resolving liquidity challenges, attracting a wider base of institutional investors.
Asia-Pacific Private Credit on a Strong Upward Trajectory
The Asia-Pacific region raised USD 11.2 billion in real estate private credit between 2020 and 2024—a 40% increase that reflects the region’s rising prominence in alternative real estate lending.
Over the next three years, Knight Frank projects USD 90–110 billion in private credit growth across major markets including Australia, Hong Kong SAR, India, and South Korea.
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Australia is expected to drive nearly 50% of this expansion.
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India is projected to contribute 20–25%, supported by sustained real estate debt demand.
Despite representing just 5% of global private credit fundraising, Asia-Pacific is showing strong momentum with average fund sizes consistently exceeding USD 100 million since 2022.
Australia leads the region, accounting for 40% of fundraising, with private credit now representing USD 50 billion, or 16% of the country’s commercial real estate lending. South Korea and Japan account for 11% and 5%, respectively.
Growing Participation from Family Offices
The report points to rising interest from ultra-high-net-worth individuals and family offices, who collectively manage an estimated USD 3.1 trillion in global assets.
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37% of family offices plan to increase indirect real estate investments within 18 months.
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Nearly one-third aim to boost private credit allocations the highest among all asset classes.
Private credit strategies typically target returns 3–6.5% above benchmark rates, with high-yield strategies offering double-digit potential. The high-rate environment is further strengthening the appeal of this asset class.
Key Investment Themes
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Development Financing
Filling gaps left by banks reducing development lending due to regulatory pressures like Basel III. -
Bridge & Refinancing Solutions
Supporting markets facing valuation adjustments or bank reluctance for refinancing—especially in Hong Kong SAR and Australia. -
Value-Add Strategies
Funding ESG upgrades, office conversions, and bespoke financing needs. -
New-Economy Assets
Capital flowing into data centres, logistics, and build-to-rent residential projects.
Market Outlook: Positive with Selective Opportunities
While the private credit sector faces risks such as regulatory evolution and liquidity pressures, the report suggests that market share will continue to grow. However, unlike Western markets where private credit often replaces traditional lending, Asia-Pacific home to deposit-rich banking systems—will see private credit complement bank lending rather than replace it.
Simon Mathews, Director, Capital Advisory, Knight Frank, noted:
“Private credit offers speed, flexibility, and tailored solutions that are increasingly preferred by developers across Asia-Pacific. With interest rates expected to remain higher for longer, real estate private credit is positioned to deliver some of the most attractive risk-adjusted returns in over a decade.”
