India’s Private Credit Market to Remain Strong Through 2028, Led by Real Estate: EY Report

India's private credit market is projected to stay buoyant over the next two years despite rising competition. Real estate continues to lead deal activity in the first half of 2026, closely followed by healthcare, according to an EY survey report.

The market expanded significantly during H1 2026 despite global macroeconomic challenges, geopolitical tensions, commodity price volatility, and trade uncertainties. EY attributed this growth to solid domestic fundamentals, a robust banking sector, improving asset quality, and broad-based credit growth.

Private credit investments in India stood at $3.5 billion in H1 2026. Domestic funds accounted for a significant share of both total deal count and total deal value. According to the report, domestic private credit players outperformed global funds, capturing a share of 74 percent of the total deal value and accounting for approximately 79 percent of the total deal count. Market participants continued to show a clear preference for structured capital and flexible capital solutions.

By sector, real estate dominated the overall private credit market, accounting for 35 percent of the total deal value. Healthcare followed at 13 percent. The food and beverage sector also witnessed a notable increase in private credit activity during H1 2026, emerging as the third-largest sector by deal value with a share of 12 percent, compared to around 1 percent in H2 2025.

The expansion in private credit coincides with stronger fundamentals in India's banking sector. Scheduled Commercial Banks entered the 2027 fiscal year with healthier balance sheets, improved asset quality, and strong capital buffers. These factors support continued credit expansion and resilience against potential economic shocks.

Data from the report shows that the Capital to Risk-weighted Assets Ratio (CRAR) of banks improved to 17.7 percent as of March 2026, compared to 17.4 percent a year earlier. The Common Equity Tier 1 (CET1) ratio also rose to 15.3 percent from 14.8 percent during the same period. While bank profitability moderated from previous levels, it remained robust, with return on assets (RoA) at 1.3 percent and return on equity (RoE) at 12.6 percent.

Asset quality further improved during fiscal year 2026. The gross non-performing asset (GNPA) ratio declined to 1.8 percent, and the net NPA ratio fell to 0.4 percent. The provision coverage ratio stood at 75.6 percent, while the annualized slippage ratio moderated to 1.2 percent.

Looking ahead, the EY survey indicates that 60 percent of respondents remain bullish on India's private credit market over the next one to two years, despite expectations of increased competition. Survey respondents reported mixed views regarding the impact of geopolitical developments, with most noting limited impact on deployment activity. However, real estate was identified as the sector with the highest perceived risk of default, even as it remained among the most active segments for deals. Stress-related situations, capital expenditure requirements, and M&A financing emerged as the primary drivers of private credit demand.

"The dominance of domestic funds in India's private credit market highlights a structural shift in how capital is deployed locally. With $3.5 billion recorded in H1 2026 and robust banking fundamentals providing a strong economic backbone, private credit is emerging as a critical financing tool. While real estate leads deal activity, the rise in sectors like food and beverage indicates broadening market demand for structured capital solutions to support M&A and capital expenditures." — Dr. Shishir Gupta, Founder & CEO, StartupLanes