Private credit deployments in India fell to $3.5 billion in the first half of 2026, a 61% decline from the previous year. This contraction is largely due to a high base effect and evolving global investor sentiment. While international interest has dipped, domestic funds now account for nearly three-fourths of deployments, with real estate remaining the primary target for capital.
Private credit activity in India saw a sharp correction in the first half of 2026, with deployments falling to $3.5 billion compared to $9 billion during the same period in 2025. This 61% decline is less about a sudden collapse in business confidence and more about a high base effect, as the previous year's figures were significantly inflated by a single large $3.1 billion fundraise. When excluding such large-scale transactions, the underlying demand for private credit remains active, though the market is navigating a more cautious macroeconomic environment.
Domestic Funds Gain Dominance
A notable shift in the market is the increasing reliance on domestic capital. Indian funds have stepped up, now accounting for nearly 75% of total deployments. This stands in contrast to the trend in the first half of 2025, where foreign funds were the dominant force, contributing 68% of the capital. As global investors grapple with volatility and re-evaluate their exposure to emerging markets, domestic managers such as Kotak Alternate Assets Management, Avendus, and Motilal Oswal Alts have successfully raised capital for their structured credit and yield-focused funds. This transition indicates that local expertise is increasingly filling the gap left by retreating international players.
Real Estate Remains a Key Focus
Despite ongoing concerns about the property sector, real estate continues to be the most preferred destination for private credit. Investments in this sector made up 35% of the total deployments in the first half of 2026. A clear example of this continued demand is the $176 million raised by Kalpataru, which was the largest deal recorded during this period. For developers, private credit acts as a vital lifeline when traditional bank funding is restricted or when they require flexible, customized deal structures to meet specific expansion or acquisition needs. Other sectors like healthcare and food and beverages also attracted significant interest, accounting for 13% and 12% of the total, respectively.
Competitive Landscape and Future Outlook
The future of private credit volumes will depend on how the industry adapts to a changing competitive environment. The Reserve Bank of India’s decision to allow banks to engage in acquisition financing and the overall surge in bank credit growth are creating new competition for private credit funds. Since private credit is often used as bridge financing—where lenders step in when banks cannot—increased accessibility to cheaper bank loans may limit the scope for private credit providers. Investors tracking this sector may monitor whether private credit funds shift their focus toward riskier, more complex projects that traditional banks may still avoid. The ability of these funds to maintain profit margins while navigating these competitive pressures will be a key factor for the market in the coming months.