Private credit may bridge real estate's mid-stage funding gap: Report

A Sundaram Alternates report pegs a $15-20 billion opportunity in mid-stage construction financing, as banks and NBFCs pull back. ESG-focused private credit could fill the gap

Mid-stage construction funding gap in India’s real estate is seen as an opportunity worth $15–20 billion for the private credit segment, with 15–20 per cent risk-adjusted returns, according to a report by Sundaram Alternates.

 

The report highlights that mid-stage construction financing remains underserved by banks and non-banking financial companies (NBFCs), creating space for private credit to emerge as a high-return, impact-led solution. Private credit, it added, can play a pivotal role in powering India’s real estate sector, which is projected to reach $1 trillion by 2030 and contribute 13 per cent to gross domestic product (GDP).

 

How can private credit reshape real estate funding?

 

ESG-integrated private credit can reduce 12,800 tonnes of CO₂ annually and impact over 1.3 million lives, according to the report.

 

India’s property market is currently in an upcycle, with 89 million sq ft of office leasing recorded in 2024 and a 35 per cent year-on-year rise in foreign direct investment inflows in the first quarter of 2025. “Yet, mid-stage construction financing remains underserved as banks and NBFCs pull back,” the report noted.

 

Why is ESG integration key to bridging the gap?

 

The study further emphasised that climate-first private credit can help bridge India’s real estate funding gap, as ESG (environmental, social and governance) integration becomes increasingly critical. The real estate sector accounts for nearly 40 per cent of global energy-related CO₂ emissions, making sustainable finance both an opportunity and a necessity.

 

With nearly 70 per cent of the infrastructure required for 2070 yet to be built, embedding ESG principles early can generate both financial and social value, the report said. ESG-integrated private credit, it added, offers a unique path to deliver returns while enabling measurable environmental and social impact.

 

What makes climate-first private credit a viable solution?

 

“India’s real estate story is no longer just about scale—it’s about sustainability,” said Karthik Athreya, managing director, Sundaram Alternates. “Our white paper demonstrates that climate-first private credit is the missing link between investor capital and India’s $1 trillion real estate growth. It’s a practical roadmap showing how disciplined risk management and measurable climate outcomes can go hand in hand.”

 

The report stressed that climate-first investing must be underpinned by robust risk management, using proven practices such as amortising payout structures, multiple security packages, and strong promoter alignment to safeguard investor capital while advancing measurable climate goals.