APAC’s Real Estate Private Credit Rises to $11.2 Billion

Signalling the region’s growing appetite for alternative lending, Asia-Pacific (APAC) real estate private credit has raised $11.2 billion in funds between 2020 and 2024, marking a 40% surge, Knight Frank Asia Pacific said.

In its latest report, Knight Frank said that private credit’s rising prominence is reshaping the funding landscape, providing borrowers with a credible and competitive alternative to traditional bank financing.

In the first half of 2025, private credit fundraising directed towards the real estate sector reached 19%, its highest share in the past five years, which reflects both investor confidence and the growing role of private credit in meeting financing needs.

This shift in capital flows has coincided with a broader resurgence of investor appetite for real estate as an asset class globally. Real estate debt fund-raising has accelerated in recent times, the report said.

Dry powder in private credit, particularly within direct lending, has expanded substantially, with global levels nearly quadrupling since 2014.

However, this growth contrasts sharply with the persistent credit gap in APAC, especially when compared to the well-established North America. As of June 2025, APAC accounted for only 5% of the global total, based on target fundraise amount, underscoring its under penetration relative to North America and Europe.

The report also pointed out that a key structural distinction helps explain this divergence. Most developed APAC economies such as Singapore, Australia and Japan were net savers. Many such markets operate with ample deposits and low loan-to-deposit ratios, leaving banks in a position of actively seeking lending opportunities rather than retreating from them.

Simon Mathews, Director, Capital Advisory Global Capital Markets at Knight Frank, said that private credit was becoming an increasingly prevalent financing option for developers and investors across Asia-Pacific, offering speed, flexibility, and solutions, in place of or complementing traditional lending sources.

“Our research shows that while banking relationships continue to anchor the market for core investments, non-bank lenders are increasing their market share for opportunistic business plans in markets such as Australia, India, Hong Kong SAR, and South Korea,” he added.

Deposit Shortfalls

By contrast, banks in the US and Europe often face deposit shortfalls and higher regulatory capital costs, making them more inclined to shift real estate and other capital-intensive exposures into the institutional market.

As a result, private credit in APAC does not displace banks in the same systemic way it does in the West. Instead, its role is complementary and cyclical.

Banks remained competitive providers of straightforward real estate loans, while private credit fills targeted gaps where banks are less active, Knight Frank said.

For example, higher-risk developments, refinancing stress, cross-border transactions, or cases requiring additional leverage. In fact, many private credit funds in the region rely on bank financing themselves to achieve ‘an extra turn’ on returns, highlighting how closely the two systems remain intertwined.

Looking ahead, this relationship suggests that while interest in private real estate debt is growing, particularly from the ultra-high-net-worth individuals (UHNWI) and family offices, APAC’s private credit market growth will be more nuanced depending on the funding landscape in the region.

The opportunities for private credit are therefore expected to be selective – arising from cyclical dislocations, market stress, or borrower’s needs for more flexible capital, the report said.