As housing sales show signs of slowing across major cities, a quiet but significant shift is taking place in the way real estate projects are being financed. With traditional funding channels turning cautious, private credit is increasingly emerging as a preferred source of capital for developers looking to navigate a softer market environment.
Residential sales have cooled after a strong post pandemic run, largely due to affordability pressures, higher interest rates and more selective buyers. This slowdown has directly impacted developers’ cash flows, reducing the steady inflow of customer advances that often fund construction activity. At the same time, banks and large non bank lenders have tightened lending norms, especially for land purchases and early stage construction, as they prioritise asset quality and regulatory compliance.
In this gap, private credit funds and alternative investment vehicles have found an opportunity. These players offer customised debt solutions that are faster to execute and more flexible in structure than conventional loans. For developers, private credit can fund land acquisition, project approvals, construction costs or even refinancing needs when sales are delayed. While the cost of such capital is higher, many builders see it as a practical bridge until market conditions improve and cheaper financing becomes accessible again.
Investor interest in private credit has also grown as returns from traditional asset classes face pressure. Real estate backed private credit offers relatively predictable cash flows and asset security, making it attractive for funds seeking yield. As a result, deal volumes in this space have been steadily rising, even as equity investments into real estate have moderated.
The growing role of private credit reflects a broader evolution in India’s real estate financing ecosystem. Developers are becoming more strategic in how they combine equity, bank loans and private debt to manage risk and liquidity. However, the increased dependence on higher cost funding also places pressure on project profitability and underscores the importance of timely execution and sales recovery.
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