Real Estate Leads India’s Private-Credit Deals but Also Tops Default-Risk Concerns in EY Survey
Real estate remained the largest destination for private-credit capital in India during the first half of 2026, accounting for 35% of total deal value, even as fund managers identified the sector as carrying the highest perceived default risk, according to EY's latest assessment of the country's rapidly evolving private-credit market.
The apparent contradiction captures one of the defining characteristics of private credit:
higher perceived risk can coexist with substantial investor demand when transactions offer attractive yields, collateral protection and appropriately structured terms.
India recorded approximately:
$3.5 billion
of private-credit investments during H1 2026 across:
102 transactions above $10 million.
That was broadly stable compared with approximately:
$3.4 billion
in H2 2025.
Real estate accounted for:
35% of total deal value,
making it the largest sector for private-credit deployment.
Healthcare followed with approximately:
13%,
while food and beverages accounted for:
12%.
At the same time, EY's Private Credit Pulse Survey identified real estate as the sector carrying the:
highest perceived default risk.
Roads ranked next, followed by energy including renewables, metals and manufacturing.
The findings suggest that lenders are not withdrawing from higher-risk sectors. Instead, they are becoming increasingly selective about:
borrowers,
projects,
collateral,
cash flows,
deal structures,
and pricing.
Real Estate Captures 35% of Private-Credit Deal Value
Real estate was the clear sector leader in private-credit deployment during the first six months of 2026.
The sector represented:
35%
of aggregate deal value.
That placed it significantly ahead of:
healthcare at 13%
and:
food and beverages at 12%.
The concentration demonstrates how important alternative lenders have become to India's property-financing ecosystem.
Real-estate developers frequently require capital for:
project development,
refinancing,
land-related financing,
construction,
working capital,
and balance-sheet restructuring.
Private-credit funds can provide financing structures that traditional lenders may be unwilling or unable to offer in the same form.
Real Estate Also Carries Highest Perceived Default Risk
The same sector attracting the most capital was also viewed as:
the riskiest.
Respondents to EY's June 2026 Private Credit Pulse Survey identified real estate as having the highest perceived default risk among the sectors assessed.
It was followed by:
roads,
energy including renewables,
metals,
and:
manufacturing.
This does not mean fund managers expect widespread real-estate defaults.
Instead, it reflects the relative risks lenders see when comparing sectors.
Real-estate projects can be particularly sensitive to:
execution delays,
sales velocity,
regulatory approvals,
cost overruns,
leverage,
and refinancing conditions.
High Risk Does Not Necessarily Mean Low Investment
The findings illustrate an important feature of private-credit investing.
Fund managers do not necessarily avoid every sector perceived as risky.
Instead, they attempt to:
price and structure the risk.
A lender may accept greater risk if the transaction provides:
higher interest rates,
strong collateral,
cash-flow controls,
financial covenants,
promoter guarantees,
or other contractual protections.
Private credit therefore operates differently from conventional low-risk lending.
The objective is often to identify situations where the expected return adequately compensates for the underlying credit risk.
India Records $3.5 Billion of Private-Credit Investments
India's overall private-credit market remained resilient during H1 2026.
Investments totalled approximately:
$3.5 billion.
EY counted:
102 transactions exceeding $10 million each.
This compares with approximately:
$3.4 billion
of investments during H2 2025.
The stability is notable because the first half of 2026 was characterised by considerable global uncertainty.
Investors faced:
geopolitical tensions,
commodity-price volatility,
currency movements,
and financial-market uncertainty.
Despite those pressures, India's private-credit deployment remained broadly steady.
Deal Count Rises From H2 2025
While overall investment value remained relatively stable, the number of transactions increased.
H1 2026 recorded:
102 deals above $10 million
compared with:
87
during H2 2025.
This indicates that capital was distributed across a greater number of transactions.
That shift is consistent with another major trend identified by EY:
the growing importance of:
mid-sized deals.
Mid-Sized Deals Account for 61% of Deal Value
Transactions valued between:
$10 million and $60 million
accounted for approximately:
61% of total private-credit deal value
during H1 2026.
That was up from:
51%
during H2 2025.
The increase suggests that private-credit managers are finding more opportunities in India's mid-market.
These transactions can offer lenders the ability to:
diversify portfolios,
negotiate stronger protections,
and target borrowers that may have fewer financing alternatives than large corporations.
Large Deals Lose Share
At the opposite end of the market, very large transactions became less dominant.
Deals exceeding:
$120 million
accounted for approximately:
18% of aggregate deal value
during H1 2026.
That compared with:
27%
in H2 2025.
The shift does not mean large transactions have disappeared.
Instead, the market is becoming more broadly distributed across transaction sizes.
This can help create a deeper private-credit ecosystem rather than one dependent on a small number of exceptionally large deals.
Domestic Funds Dominate India’s Private-Credit Market
One of the most significant developments identified by EY was the growing role of:
domestic private-credit funds.
Indian funds accounted for approximately:
74% of total deal value
during H1 2026.
They also represented nearly:
79% of transaction volume.
This marks a substantial change in a market that historically relied more heavily on global alternative-investment managers.
Domestic capital is increasingly becoming the principal source of private-credit deployment.
Global Funds’ Share Falls to 26%
Global funds accounted for approximately:
26% of private-credit deal value
during H1 2026.
Their share had already declined to:
36%
in H2 2025 from:
68%
in H1 2025.
The shift does not necessarily indicate that international investors are abandoning India.
Large global funds may continue to focus on:
bigger transactions,
special situations,
and opportunities where their scale provides an advantage.
Domestic managers, however, are increasingly competitive across the broader market.
Domestic Capital Signals Market Maturity
The rise of Indian private-credit managers is important for the long-term development of the asset class.
A market dependent primarily on overseas funds can be vulnerable to changes in:
global risk appetite,
international interest rates,
and cross-border capital allocation.
A larger domestic investor base can create greater stability.
Local managers may also have deeper familiarity with:
borrowers,
promoters,
regulations,
and sector-specific operating conditions.
That can improve their ability to assess complex credit opportunities.
Refinancing Remains Important Driver
Private credit continues to play a major role in:
refinancing.
Companies may use alternative lenders to replace:
existing debt,
near-term maturities,
or financing structures that no longer match their needs.
Real estate is particularly suited to refinancing transactions because property projects often require capital over several stages.
A project may have valuable underlying assets but still face temporary cash-flow mismatches.
Private lenders can design financing around those circumstances.
Kalpataru Properties Raises $176 Million
Among the notable transactions identified by EY was approximately:
$176 million
raised by:
Kalpataru Properties Limited.
The financing was used for:
refinancing.
The transaction illustrates why real estate accounted for such a substantial share of private-credit activity.
Large developers can use alternative capital to manage existing liabilities while continuing to execute projects.
Private Credit Extends Beyond Real Estate
Although property was the leading sector, the H1 2026 market was broadly diversified.
Other significant transactions included approximately:
$156 million raised by HyFun Foods Group
for refinancing and working-capital requirements.
The:
GMR Group raised approximately $150 million
to fund group companies.
The:
Manipal Group raised around $124 million
for refinancing.
Meanwhile, Inspira Group's:
Lenexis Foodworks Private Limited
raised approximately:
$113 million
for acquisition financing.
These transactions demonstrate the expanding use cases for private credit.
Healthcare Captures 13% of Deal Value
Healthcare was the second-largest sector, accounting for approximately:
13%
of H1 2026 private-credit deal value.
Healthcare can be attractive to lenders because many businesses in the sector have relatively visible demand.
Hospitals, pharmaceuticals, diagnostics and healthcare services can require substantial capital for:
expansion,
acquisitions,
equipment,
and refinancing.
The sector therefore offers opportunities for structured lenders across both growth and balance-sheet financing.
Food and Beverage Share Jumps to 12%
One of the biggest changes occurred in:
food and beverages.
The sector accounted for approximately:
12% of total deal value
during H1 2026.
That compares with only:
1%
during H2 2025.
The sharp increase indicates growing lender interest in consumer-oriented businesses.
Food businesses may seek private credit for:
capacity expansion,
working capital,
acquisitions,
distribution growth,
and refinancing.
Private Credit Fills Gaps Left by Traditional Lending
Private credit has grown partly because not every corporate financing requirement fits conventional bank lending.
Banks typically operate within:
regulatory frameworks,
collateral requirements,
sector limits,
and standard credit processes.
Private funds can often offer more customised structures.
They may finance:
acquisitions,
holding companies,
special situations,
complex refinancing,
or businesses requiring flexible repayment schedules.
That flexibility is one of the asset class's principal competitive advantages.
Flexibility Comes at a Higher Cost
Borrowers generally pay for that flexibility.
Private-credit financing is often more expensive than conventional senior bank debt.
Interest rates can be higher because lenders are accepting:
greater complexity,
higher risk,
lower liquidity,
or customised repayment structures.
Borrowers therefore typically turn to private credit when the value of:
speed,
flexibility,
certainty,
or structure
outweighs the additional financing cost.
Investor Return Expectations Remain High
EY's June 2026 survey indicates that private-credit investors continue to target substantial returns.
Approximately:
33% of respondents
targeted internal rates of return between:
12% and 18%.
The remaining:
67%
preferred opportunities with IRRs:
above 18%.
Those expectations help explain why investors are willing to evaluate sectors with elevated credit risk.
Higher targeted returns generally require lenders to take:
greater complexity,
structural risk,
or borrower risk
than traditional fixed-income investments.
Risk Management Becomes Critical
High-return expectations increase the importance of disciplined underwriting.
A lender cannot rely solely on a high coupon.
The central question is whether:
principal and interest will actually be repaid.
Private-credit managers therefore conduct extensive analysis of:
cash flows,
asset values,
promoter strength,
leverage,
industry conditions,
and downside scenarios.
In real estate, underwriting may also involve detailed assessment of:
project completion,
sales,
approvals,
construction progress,
and property values.
Collateral Is Particularly Important in Real Estate
Real estate offers one characteristic that can make it attractive despite its risks:
tangible assets.
Property can potentially provide collateral against financing.
Lenders may structure security over:
land,
projects,
shares,
receivables,
or cash flows.
Collateral does not eliminate credit risk.
Recovering value from real-estate assets can be time-consuming, especially when projects face:
legal disputes,
regulatory issues,
or weak demand.
Nevertheless, asset backing can provide lenders with additional protection.
Project Execution Is a Key Risk
One of the biggest risks in property financing is:
execution.
A project may appear financially viable based on its expected completion value.
But delays can materially change the economics.
Construction delays can increase:
interest costs,
labour expenses,
material costs,
and working-capital requirements.
Delayed possession can also affect:
customer confidence
and:
future sales.
Private-credit managers therefore need to evaluate not only asset values but also the developer's ability to execute.
Sales Velocity Matters to Repayment
Real-estate credit frequently depends on:
project cash flows.
If apartments, offices or other properties sell more slowly than expected, cash available for debt servicing can decline.
This makes sales velocity an important credit variable.
Lenders may monitor:
bookings,
collections,
inventory,
construction progress,
and escrow accounts
throughout the life of a transaction.
Private credit therefore often involves more active portfolio monitoring than conventional traded debt.
Refinancing Risk Can Create Vulnerability
Real-estate borrowers may also depend on future refinancing.
A loan can be viable when credit markets are liquid but become more difficult to repay if:
interest rates rise,
investors become cautious,
or alternative lenders reduce exposure.
This creates:
refinancing risk.
The risk is particularly important for highly leveraged projects or holding-company structures where operating cash flows may not immediately cover principal repayments.
Roads Rank Second for Perceived Default Risk
After real estate, survey respondents identified:
roads
as another sector carrying significant perceived default risk.
Infrastructure projects can involve:
long construction periods,
regulatory complexity,
traffic assumptions,
government contracts,
and substantial upfront capital.
Private lenders therefore need to evaluate both project economics and contractual structures carefully.
Energy and Renewables Also Feature in Risk Rankings
Energy, including:
renewable energy,
was another sector highlighted in the default-risk rankings.
Renewable projects can offer predictable contracted cash flows when backed by strong power-purchase agreements.
However, risks can arise from:
counterparty quality,
project execution,
tariffs,
grid connectivity,
and regulatory changes.
The sector therefore combines attractive long-duration assets with specialised underwriting requirements.
Metals and Manufacturing Also Draw Attention
Metals and manufacturing were also identified among sectors carrying elevated perceived default risk.
These businesses can be exposed to:
commodity cycles,
energy costs,
capacity utilisation,
global demand,
and leverage.
A manufacturing borrower can perform strongly during an economic expansion but face rapid margin pressure if demand slows or input costs rise.
Private-credit lenders therefore need to stress-test borrowers against cyclical downturns.
Investors Remain Optimistic Despite Risk Concerns
The risk discussion has not translated into broad pessimism.
Approximately:
73% of respondents
to EY's June 2026 survey expect India's private-credit market activity to remain:
strong over the next one to two years.
This indicates that fund managers view current risks as:
manageable
rather than:
systemic.
The market's growth prospects continue to be supported by corporate demand for flexible financing and increasing availability of domestic capital.
Private Credit Is Becoming a Core Financing Channel
Private credit began in India as a relatively specialised source of capital.
Its role is now expanding.
Businesses increasingly use the market for:
growth financing,
acquisition funding,
refinancing,
special situations,
capital expenditure,
and holding-company financing.
This makes private credit increasingly complementary to:
bank loans
and:
corporate bonds.
The result is a more diversified corporate-financing ecosystem.
India’s Corporate Bond Market Is Also Expanding
Private credit is developing alongside India's broader corporate debt market.
Outstanding corporate bonds reached approximately:
$633.9 billion in FY26.
The market has expanded substantially over the past decade.
This means companies increasingly have several potential financing channels:
banks,
public or privately placed bonds,
and private-credit funds.
Competition among these channels can give stronger borrowers greater flexibility when choosing capital structures.
Private Credit Remains Less Liquid Than Bonds
Private-credit loans are generally not traded as actively as public bonds.
Investors may therefore need to hold exposures for:
several years.
This illiquidity helps explain why private-credit funds typically seek higher returns.
Investors expect compensation for locking capital into assets that cannot easily be sold.
That makes:
underwriting quality
and:
portfolio construction
particularly important.
Domestic Funds Continue Raising Capital
Indian private-credit platforms have continued to attract fresh investor commitments.
EY highlighted several significant fundraises.
Kotak Real Estate Fund raised approximately:
$691 million
during H1 2026.
Its:
Yield & Growth Fund
raised approximately:
$496 million.
The scale of these fundraises demonstrates the amount of capital available for future private-credit deployment.
Other Credit Managers Add Fresh Dry Powder
Other managers also raised substantial capital.
Avendus raised approximately:
$290 million
for Structured Credit Fund III.
Motilal Oswal Alternatives' India Credit Excellence Fund-I raised approximately:
$183 million.
HDFC's Structured Credit Fund-I secured approximately:
$139 million.
These funds provide additional dry powder that can be deployed across future transactions.
Competition Among Lenders Could Intensify
The growth in available capital creates another challenge:
competition.
When more funds compete for the same high-quality borrowers, lenders may face pressure on:
interest rates,
fees,
covenants,
and documentation.
That can reduce expected returns or encourage investors to take greater risk.
The challenge for fund managers is therefore to grow without weakening underwriting standards.
Selectivity Could Increase in Real Estate
Real estate is likely to remain a major destination for private credit because the sector continues to have significant:
project-funding
and:
refinancing requirements.
However, EY expects lenders to become increasingly selective.
The distinction between:
high-quality developers with strong execution histories
and:
more leveraged or weaker projects
could become increasingly important.
Capital may remain available, but not necessarily on equal terms for every borrower.
Better Borrowers Could Receive More Competitive Pricing
As lender competition increases, established developers with:
strong balance sheets,
high project completion rates,
valuable collateral,
and predictable cash flows
may be able to negotiate more attractive financing terms.
Higher-risk borrowers may face:
higher coupons,
tighter covenants,
additional collateral,
or reduced loan-to-value ratios.
This represents a natural process of risk differentiation as the market matures.
AI Is Entering Private-Credit Underwriting
EY also found that:
artificial intelligence
is increasingly being used in private-credit operations.
Fund managers are adopting AI for areas including:
data analysis,
portfolio monitoring,
and underwriting.
Private credit generates substantial amounts of financial and operational information.
Technology can help lenders analyse:
financial statements,
sector indicators,
borrower performance,
and portfolio risks
more efficiently.
AI Could Improve Early-Warning Systems
One particularly useful application is:
portfolio monitoring.
Lenders can use data tools to identify early signs of deterioration.
These might include:
declining collections,
higher leverage,
delayed projects,
weaker margins,
or covenant pressure.
Earlier detection can allow lenders to engage with borrowers before a credit problem becomes significantly more difficult to resolve.
Technology therefore has the potential to strengthen risk management as private-credit portfolios become larger.
Human Underwriting Remains Essential
AI does not remove the need for experienced credit professionals.
Private-credit transactions frequently involve:
complex ownership structures,
negotiated documentation,
promoter relationships,
and company-specific risks.
These factors can be difficult to reduce to standardised models.
Technology can improve analysis.
Final lending decisions still require judgement around:
business quality,
management credibility,
collateral,
and downside protection.
Private Credit Could Stay Resilient for Next Two to Three Years
EY expects India's private-credit market to remain resilient over the next:
two to three years.
Demand is likely to continue across:
growth capital,
refinancing,
special situations,
and M&A financing.
Infrastructure and other asset-heavy sectors could become increasingly important alongside real estate.
Large transactions are also expected to continue attracting global funds, while domestic managers deepen their presence across the market.
Real Estate Captures the Central Private-Credit Trade-Off
The most important finding from the report is the apparent contradiction surrounding property.
Real estate is simultaneously:
the largest recipient of private-credit capital
and:
the sector investors perceive as carrying the highest default risk.
But these two facts are not necessarily inconsistent.
Private credit exists partly because investors are willing to finance situations that require:
specialised underwriting,
flexible structures,
and higher returns.
The central issue is therefore not whether a sector has risk.
It is whether that risk can be:
understood,
priced,
secured,
and managed.
Conclusion
Real estate has emerged as the clearest illustration of both the opportunity and risk within India's expanding private-credit market.
The sector accounted for 35% of total private-credit deal value in H1 2026, comfortably ahead of healthcare at 13% and food and beverages at 12%.
At the same time, respondents to EY's Private Credit Pulse Survey ranked real estate as the sector with the highest perceived default risk, followed by roads, energy and renewables, metals and manufacturing.
India's broader private-credit market remained resilient, recording approximately $3.5 billion across 102 transactions above $10 million during the first half of the year. Domestic funds have become particularly important, accounting for 74% of deal value and nearly 79% of deal volume.
Investor sentiment also remains constructive, with approximately 73% of surveyed participants expecting private-credit activity to remain strong over the next one to two years.
For real estate, this suggests capital is unlikely to disappear.
Instead, lenders are likely to become increasingly selective about which developers, projects and financing structures they support.
The next phase of India's private-credit expansion may therefore be defined less by how much capital is available and more by how effectively lenders distinguish between risk worth financing and risk worth avoiding.