Real estate private credit funds are preparing for refinancing activity to pick up over the next 12 months as residential sales moderate after a strong multi-year run, with developers increasingly turning to structured debt to manage cash flows and rebalance their balance sheets.
“We see the need for refinancing capital to increase in the next 12 months because of reduction in residential sales volume,” said Vikas Chimakurthy, CEO – Realty Funds at Kotak Alternate Asset Managers. He said most private credit deployed over the last two years has gone towards land acquisition and growth, with only a part used for refinancing to address cash-flow mismatches.
Fund managers, however, said that the expected rise in refinancing is not a return to the distress-led lending that characterised the market a few years ago but instead a move towards strategic use of private credit in real estate.
“The market has moved away from legacy promoter-bailout debt to more growth oriented capital,” Chimakurthy said.
Saurabh Rathi, Co-head, Real Estate Funds at Motilal Oswal Alternates said developers are now borrowing more for refinancing and acquisitions as they proactively restructure their balance sheets rather than simply stay afloat. “The recent softer residential sales have resulted in deal pipelines going up by 10 to 20 percent across the market as builders choose flexible capital over waiting on customer collections,” he said.
“Back then, a large chunk of real estate credit was rescue capital, coming in to fix something that had already broken. Today, developers are approaching private credit before there is a problem, not after. It has become a planning tool rather than a bailout,” Rathi said.
Amit Bhagat, Co-founder, CEO and Managing Director of ASK Property Funds, said private credit demand had shifted from “solution capital” before Covid, which included refinancing, lender exits and last-mile funding, to growth capital as residential sales recovered.
“Going forward, as sales stabilise after the last few years of strong momentum, I believe demand will be more balanced, growth capital will remain relevant, but solution capital will also come back into focus,” Bhagat said.
Residential projects continue to account for the largest share of private credit investments, with the segment attracting more than 80 per cent of real estate credit because projects generate predictable cash flows through home sales.
Construction finance has also seen renewed demand, largely because banks have grown stricter about funding under construction projects, pushing some of that need toward private credit.
Banks and NBFCs cannot finance land acquisition or provide capital to restructure existing bank loans, leaving these segments to alternative investment funds. Private credit funds are also able to tailor repayment schedules to a project’s sales cycle rather than follow fixed repayment structures.
Private credit retains an edge in construction-stage risk, bridge financing and structured acquisitions, where transactions require quicker execution and more flexible underwriting than conventional lenders typically offer.
Published on July 6, 2026
