India’s real estate sector will require nearly Rs 50 lakh crore of capital over the next 10 years to support its growth into a $1 trillion market by 2030, and potentially $5-7 Tn by 2047, according to a report by ANAROCK Capital.
Highlighting the pain points of real estate financing, the report said that regulatory hurdles often increase project costs and financing difficulties while RBI’s prohibition of banks from funding land acquisitions and approvals, forces developers to rely on NBFC, AIFs and PEs. Banks also require high equity contributions and strict Debt Service Coverage Ratio (DSCR) compliance. NBFCs & private lenders charge higher interest rates, raising project costs. Legal disputes, title issues and regulatory clearances cause delays & funding roadblocks. High interest rates and limited institutional funding impact developers, especially smaller firms. Stricter RBI norms make loan refinancing & debt restructuring difficult, while nonperforming assets (NPAs) reduce future borrowing capacity.
Umesh Gowda H A, chairman and founder of Sanjeevini Group said the Indian real estate sector is entering a long-term capital expansion cycle, with the next decade expected to witness unprecedented institutional participation.
“One of the most important trends is the growing diversification of funding sources. While banks continue to dominate real estate lending, AIFs, REITs, NBFCs and private capital are increasingly filling critical gaps across land acquisition, construction finance and last-mile funding. At the same time, the strong growth trajectory of housing finance reflects the continued strength of end-user demand in India.”
AIFs have emerged as a key funding source for developers, especially after the 2018 NBFC crisis. As of Dec 2025, real estate accounted for the largest share (~12%) of total AIF investments (~USD 8 Bn), as per the SEBI.
Ankur Jalan, CEO, Golden Growth Fund (GGF), a category II Real Estate focussed Alternative Investment Fund (AIF) said the Indian real estate sector has witnessed a structural shift in its funding ecosystem over the last few years, with AIFs emerging as a critical source of growth capital for developers.
“Today, AIFs are not only supporting land aggregation and acquisition phases - where traditional lenders like banks and NBFCs typically remain absent - but are also increasingly participating across post-approval, construction and last-mile funding stages. This has helped improve project execution, liquidity visibility and overall market confidence. As the sector becomes more organised and demand continues to shift towards branded developers with stronger execution capabilities, institutional capital through AIFs is expected to play an even larger role in shaping India’s next real estate growth cycle.”
The growing participation of AIFs also reflects increasing investor confidence in Indian real estate as a long-term asset class.
Tier II & Tier III developers are still locked out of institutional lending. Capital concentrates in the same five cities and the same fifteen sponsors. However, post-pandemic, the rise in demand, especially larger homes and relatively high affordability will greater participation by institutional capital.
Lalit Parihar, managing director, Aaiji Group, a Dholera-based real estate firm said as real estate market evolves and demand deepens beyond established markets, access to diversified funding channels is becoming critical.
“Traditionally, smaller developers have relied heavily on internal accruals and informal financing because institutional capital remained concentrated in larger metropolitan markets. However, the gradual expansion of AIFs, housing finance and private capital into emerging cities is helping improve liquidity access, project execution and overall market confidence. Addressing funding gaps in affordable and mid-income projects, especially in tier-2 and tier-3 cities, will be essential for achieving balanced real estate growth. The next decade could see institutional capital increasingly move towards end-user driven housing markets.”
Real estate financing in India today looks fundamentally different from what it did a decade ago. It is more institutional, more regulated, and more accountable. But the next phase will not be won by adding more vehicles for the same set of borrowers. It will be won by extending the financing stack — to the affordable segment, to the smaller developer, to the cities outside the top five.
Whether Indian real estate becomes a trillion-dollar industry will depend less on how much capital enters it, and far more on how far that capital is willing to travel, the report said.