India’s real estate sector could require nearly Rs 50 lakh crore in capital over the next decade as it works toward becoming a $1 trillion market by 2030 and potentially expanding to a $5-7 trillion industry by 2047, according to a report by ANAROCK Capital.
The report presents a detailed assessment of the financing requirements, challenges and opportunities shaping the future of India’s property market. While the sector has become more institutionalised and regulated over the years, significant gaps remain in the availability and distribution of capital across different categories of developers and markets.
Also Read: Noida Expressway Leads NCR’s Shift Toward Quality-Driven Luxury Housing
Financing Challenges Continue to Impact Developers
According to the report, regulatory hurdles remain among the key challenges affecting project financing. These hurdles often contribute to increased project costs and financing complexities.
One of the major constraints identified is the Reserve Bank of India’s restriction on banks funding land acquisitions and approvals. As a result, developers frequently depend on Alternative Investment Funds (AIFs), Non-Banking Financial Companies (NBFCs) and private equity investors to finance these stages of project development.
The report noted that banks generally require substantial equity contributions from developers and impose strict Debt Service Coverage Ratio (DSCR) requirements. In contrast, NBFCs and private lenders often charge higher interest rates, resulting in increased financing costs.
Additional challenges include legal disputes, title-related issues and delays in obtaining regulatory approvals. These factors frequently lead to project delays and create funding bottlenecks.
High borrowing costs and limited access to institutional funding continue to affect developers, particularly smaller firms. The report also highlighted that stricter RBI regulations have made debt restructuring and refinancing more difficult, while non-performing assets (NPAs) can restrict future borrowing capacity.
Institutional Capital Increasingly Shaping the Sector
Industry participants indicate that the funding landscape has evolved significantly over recent years.
Umesh Gowda H A, Chairman and Founder of Sanjeevini Group, said, “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.”
The report highlighted that Alternative Investment Funds have emerged as an important source of financing for developers, particularly following the NBFC liquidity crisis in 2018.
According to SEBI data cited in the report, real estate accounted for the largest share of total AIF investments as of December 2025, representing approximately 12 per cent of overall investments valued at nearly USD 8 billion.
Growing Role of Alternative Investment Funds
Industry experts suggest that AIF participation is expanding across multiple stages of project development.
Ankur Jalan, Chief Executive Officer of Golden Growth Fund (GGF), a Category II real estate-focused Alternative Investment Fund, said, “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 report stated that the increasing role of AIFs reflects growing investor confidence in Indian real estate as a long-term asset class.
Funding Access Remains Uneven
Despite the rise in institutional participation, access to capital remains uneven across the sector.
According to the report, Tier II and Tier III developers continue to face difficulties in securing institutional financing. Capital deployment remains concentrated in a limited number of cities and among a relatively small group of developers.
The report noted that post-pandemic demand trends, including rising demand for larger homes and relatively high affordability levels, could support greater institutional participation across broader segments of the market.
Lalit Parihar, Managing Director of Aaiji Group, said, “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.”
Also Read: What the Mumbai–Pune Expressway Missing Link Actually Changes
Capital Distribution May Determine Future Growth
The report observed that real estate financing in India today differs significantly from the system that existed a decade ago. It is now more institutional, regulated and accountable.
However, the next phase of growth may depend less on creating additional financing vehicles for established borrowers and more on extending funding access to affordable housing projects, smaller developers and emerging urban centres.
According to the report, whether Indian real estate ultimately achieves trillion-dollar industry status will depend not only on the amount of capital entering the sector but also on how effectively that capital is distributed across different markets and developer categories.
The report concluded that the long-term growth of India’s real estate sector will be shaped by the ability of institutional capital to reach affordable housing segments, smaller developers and cities beyond the country’s major metropolitan centres.
