Stories
Indian Real Estate Private Credit Faces Refinancing Test: A Post-IL&FS Reckoning
- •India's private credit market, which filled a financing gap post-IL&FS crisis, now faces a critical test as loans mature and require refinancing.
- •Refinancing reveals true credit quality, unlike deployment volume, as current market conditions challenge original assumptions about asset valuations, sales, and interest costs.
- •Unlike the US, India lacks consolidated data on private and structured real estate debt maturities, but the scale of alternative capital, including AIFs and NBFCs, is significant.
- •The market split post-IL&FS, with stronger developers retaining bank access and weaker ones relying on structured credit, will dictate varied refinancing outcomes.
- •The 2026-27 period is an observation point to assess post-IL&FS underwriting quality, with a tighter regulatory framework from RBI and SEBI scrutinizing refinancing more closely.
Key Questions Answered
Category II AIF commitments stood at ₹12.74 lakh crore as of March 2026, with ₹4.13 lakh crore actually invested, while cumulative AIF investment in real estate reached ₹1.29 lakh crore. Additionally, NBFC advances to commercial real estate have surpassed ₹1 lakh crore alongside growing bank credit.
Following the IL&FS crisis, lending to real estate developers fell from about ₹52,000 crore in FY2018 to ₹27,000 crore in FY2019 as traditional lenders retrenched. Stronger and better-capitalised developers maintained their access to banks and institutional lenders, whereas weaker or highly leveraged borrowers turned to structured and private credit.
The Reserve Bank of India raised risk weights on qualifying bank exposures to NBFCs by 25 percentage points in November 2023. Simultaneously, SEBI has strengthened valuation norms and oversight for Alternative Investment Funds.
