Report Overview

The growing PE/AIF participation, surging financial demand in infrastructure and real estate development projects, and the widening SME credit gap are expected to drive India Private Credit Market during the forecast period between 2025 and 2031.

India Private Credit Market – Industry Trends & Forecast Report, 2031

India Private Credit Market size was estimated at USD 11.94 billion in 2024. During the forecast period between 2025 and 2031, India Private Credit Market size is projected to grow at a CAGR of 12.67% reaching a value of USD 27.52 billion by 2031. Prominent drivers of India Private Credit Market include resilient economic fundamentals, easing inflation, and the rising need for alternative financing as traditional bank lending slows. India’s macroeconomic backdrop in 2025 remained stable, with GDP growth at 6.5%, supported by strong public capital expenditure and services expansion, while inflation dropped to a multi-year low of 2.8%, enabling policy rate cuts by the RBI and creating a favorable credit environment. However, bank credit growth decelerated, opening opportunities for private lenders across SME, infrastructure, and real estate segments. Private credit activity surged in early 2025, with USD 9 billion deployed across 79 deals, reflecting a 53% year-on-year increase, driven by structured credit transactions and mid-market borrowers, with global funds dominating large deals and domestic AIFs and NBFC-linked platforms capturing mid-sized opportunities. Investor sentiment, highlighted in the EY Private Credit Pulse survey, indicates a maturing market with enhanced risk management, rising deal volumes, and growing focus on real estate, infrastructure, and healthcare, while funds increasingly target returns in the 12%–24% IRR range, balancing performing credit with higher-yield special situations. Supply-side momentum is evident as global players such as Blackstone and Bandhan AMC launch retail-focused private credit vehicles, and domestic institutions like NIIF, Motilal Oswal, and Vivriti Asset Management expand mid-market lending funds, while corporates, mid-cap borrowers, and startups drive demand for flexible financing, refinancing, and liquidity support. Regulatory shifts, including the rollback of higher NBFC risk weights and improvements in India’s insolvency framework under the IBC, alongside the surge in private placements, are strengthening market depth and resilience. Overall, India’s private credit market is evolving into a mainstream asset class, backed by increasing investor participation, diversification into distressed debt and mezzanine financing, and structural funding gaps in mid-market and infrastructure lending, positioning the sector for sustained growth within the global private credit landscape.

Private Credit – Overview

Private credit refers to non-bank lending where funds, asset managers, or financial institutions provide debt directly to companies, often in the form of direct lending, mezzanine financing, distressed debt, or structured credit. It offers flexible capital solutions outside traditional banking, catering to SMEs, corporates, and specialized projects.

India Private Credit Market

Growth Drivers

Surging Financial Demand in Infrastructure Development  and Real Estate Projects

India’s infrastructure and real estate sectors are experiencing strong momentum, significantly elevating the need for alternative financing. Companies like Infra.Market highlight this shift, evolving into large-scale material and technology-driven platforms that cater to diverse projects across metros and emerging cities. The ongoing wave of construction—from airports and metro networks to highways and housing—continues to widen the demand for tailored credit solutions. Meanwhile, real estate growth remains resilient, supported by rising luxury housing sales, record office space absorption, and expanding retail and data center developments. Increasing foreign private equity participation and favorable policy measures, including 100% FDI in townships and incentives for housing projects, further reinforce market confidence. Together, these trends are fueling a surge in private credit opportunities, with lenders stepping in to bridge financing gaps and provide flexible capital to developers, infrastructure companies, and enterprises driving India Private Credit Market.

Challenges

Increasing Cost of Capital

The rising cost of capital could pose a significant restraint to the growth of India Private Credit Market. Elevated interest rates, inflationary pressures, and tighter monetary policies have increased borrowing costs for businesses across sectors. Small and medium enterprises, in particular, face challenges in accessing affordable financing, limiting their ability to expand operations or invest in growth initiatives. Higher costs also reduce the attractiveness of private credit compared to traditional financing channels, impacting deal flow and investor confidence. Consequently, the growing cost of capital acts as a barrier, slowing momentum in private credit deployment across infrastructure, real estate, and corporate financing.

Impact of Escalating Geopolitical Tensions on India Private Credit Market

Escalating geopolitical tensions could significantly impact the growth of India Private Credit Market by creating economic uncertainty, disrupting trade flows, and triggering volatility in global capital markets. Such instability often leads to currency fluctuations, rising commodity prices, and increased inflationary pressures, all of which elevate the cost of borrowing. Investors may become risk-averse, slowing capital inflows into private credit and tightening liquidity for businesses. Sectors reliant on imports, exports, and infrastructure financing face heightened challenges, while SMEs and startups encounter limited funding access. Overall, geopolitical uncertainties weaken investor sentiment, delaying transactions and restraining growth potential of India Private Credit Market.

India Private Credit Market

Segmental Coverage

India Private Credit Market – By Instrument Type

Based on instrument type, India Private Credit Market is divided into Direct Lending, Mezzanine Financing, Distressed/Special Situations, Structured Credit, and Unitranche Loans segments. The direct lending segment holds the highest share in India Private Credit Market by instrument type. Globally, direct lending has emerged as the largest private debt strategy, capturing over 75% of capital raised in recent years. In India too, large corporates, mid-market firms, and stressed businesses are increasingly opting for direct loans as banks tighten their lending norms. Flexible structures, faster execution, and the ability to cater to both performing and distressed credit needs make direct lending the preferred instrument. Its prominence reflects growing investor appetite and sustained borrower demand across sectors such as infrastructure, real estate, and manufacturing. Meanwhile, the mezzanine financing segment is expected to witness fastest growth rate during the forecast period. Mezzanine financing, a hybrid of debt and equity, is emerging as the fastest-growing segment in India’s private credit market. Its flexibility makes it highly attractive for businesses seeking growth capital, acquisitions, or expansion without diluting full ownership. Increasingly, SMEs, startups, and real estate developers are turning to mezzanine financing for quicker access to funds compared to traditional lending routes. The strong appetite from private equity firms, venture capitalists, and hedge funds further supports its momentum. Despite higher costs and repayment pressures, mezzanine financing’s ability to balance risk and return positions it for rapid expansion throughout the forecast period.

India Private Credit Market – By Borrower Type

India Private Credit Market by borrower type is divided into Small & Medium-sized Enterprises (SMEs), Large Corporates, Real Estate Developers, Infrastructure & Project Financing, and Startups & New-Economy Businesses segments. The large corporates segment holds the hgihest share in India Private Credit Market by borrower type, reflecting their central role in driving the growth of alternative financing in the country. Large corporates increasingly rely on private credit to meet diverse funding needs, including expansion, acquisitions, refinancing, working capital, and project financing, leveraging flexible structures such as non-convertible debentures, bonds, and term loans that are often unavailable through traditional banks and NBFCs. The rising presence of large private credit funds has enabled multi-billion-dollar loans to established firms across sectors like infrastructure, real estate, pharmaceuticals, manufacturing, and renewable energy, underscoring the market’s depth and maturity. While SMEs, startups, and new-economy businesses are also tapping into private credit for growth and innovation, large corporates consistently command the largest share due to their ability to manage substantial debt and complex funding requirements. This trend is further supported by regulatory reforms, including the Insolvency and Bankruptcy Code (IBC), and the expansion of Category II Alternative Investment Funds (AIFs), which have broadened the domestic and offshore investor base. Overall, private credit is emerging as a critical enabler of corporate growth in India, with large corporates at the forefront, benefiting from the combination of flexible financing, higher returns, and strategic capital solutions that continue to make the market increasingly attractive and robust.

India Private Credit Market – By End Use

On the basis of end use, India Private Credit Market is segmented into Real Estate, Infrastructure (Energy, Transport, Utilities), Manufacturing & Industrials, Healthcare & Pharmaceuticals, Technology & Startups, and Consumer & Retail.

India Private Credit Market – By Region

The in-depth research report on India Private Credit Market covers the market in the country’s major regions: North India, South India, East India, and West India regions. North India holds the highest share in India Private Credit Market and is expected to maintain its dominance during the forecast period. driven by robust deal activity and growing investor interest. The market is expected for significant expansion, with experts projecting a 12–25% increase in deal volumes in 2025, supported by competitive lending rates, improving corporate balance sheets, and the entry of established asset managers into alternative investment funds (AIFs). Key sectors such as renewable energy, data centres, logistics, healthcare, infrastructure, and real estate are attracting substantial private credit investments, with domestic funds leveraging local expertise and global funds continuing to lead in capital deployment. In 2024, Indian corporates raised USD 6.77 billion through over 230 private credit deals, with the average deal size around USD 29 million, while high-value transactions, such as Varde Partners’ USD 500 million investment in Reliance Power, highlighted market sophistication. H1 2025 saw a sharp surge in activity, with total private credit deployment reaching USD 9 billion across 79 deals, reflecting a 53% increase over H1 2024, driven by both landmark transactions like Shapoorji Pallonji Group’s USD 3.14 billion deal and healthy mid-market participation. Market participants reported increased sophistication in deal structuring, higher competition from NBFCs and family offices, and growing confidence among domestic private credit funds. The macroeconomic environment, marked by stable GDP growth of 6.5%, controlled inflation, and supportive monetary policy, further underpins private credit expansion, enabling financing for infrastructure, real estate, and growth-oriented businesses. Survey insights indicate strong investor confidence, with rising competition anticipated over the next 12 months due to increasing international capital inflows and the expansion of alternative credit platforms, positioning North India as the leading hub for private credit deployment in the country.

Competitive Landscape

Major players operating in India Private Credit Market include Varde Partners, 360 One Credit Funds, Edelweiss Alternative Asset Advisors, InCred Alternative Investments, NIIF, Motilal Oswal Asset Management, Prabhudas Lilladhar, Vivriti Asset Management, Blackstone Group, and Bandhan AMC. To further enhance their market share, these companies employ various strategies, including mergers and acquisitions, partnerships, joint ventures, license agreements, and new product launches.

Recent Developments

• In January 2025 - Avendus PE Investment Advisors launched its third private credit fund, Avendus Structured Credit Fund III (ASCF–III), targeting a corpus of up to INR 4,000 crore. The sector-agnostic fund will invest in secured and hybrid credit transactions for mature and growth-oriented companies across pharmaceuticals, healthcare, manufacturing, consumer, technology, and B2B sectors. ASCF–III aims for a diversified portfolio of 12–18 deals with a target gross IRR of 16–18%.

Scope of the Report

By Instrument Type

• Direct Lending

• Mezzanine Financing

• Distressed/Special Situations

• Structured Credit

• Unitranche Loans

By Borrower Type

• Small & Medium-sized Enterprises (SMEs)

• Large Corporates

• Real Estate Developers

• Infrastructure & Project Financing

• Startups & New-Economy Businesses

By End Use

• Real Estate

• Infrastructure (Energy, Transport, Utilities)

• Manufacturing & Industrials

• Healthcare & Pharmaceuticals

• Technology & Startups

• Consumer & Retail

By Region

• North India

• South India

• East India

• West India