Real estate faces a private credit paradox: Biggest deployment, highest default risk, shows report
According to the EY Private Credit Report H1 2026, real estate accounted for 35% of total private credit deal value in H1 2026, making it the leading sector for deployment. Healthcare followed with 13%, while food and beverage accounted for 12%.
- Aug 20, 2026,
- Updated Aug 20, 2026 6:57 PM IST
India’s private credit market is showing a notable contradiction in real estate: the sector attracted the largest share of private credit capital in the first half of 2026, even as investors viewed it as having the highest perceived default risk.
According to the EY Private Credit Report H1 2026, real estate accounted for 35% of total private credit deal value in H1 2026, making it the leading sector for deployment. Healthcare followed with 13%, while food and beverage accounted for 12%.
The strong allocation to real estate came as India’s overall private credit market remained resilient. Investments reached US$3.5 billion in H1 2026 across more than 100 transactions above US$10 million, broadly in line with US$3.4 billion recorded in H2 2025. Activity was supported by refinancing, holding company funding and acquisition financing despite global macroeconomic uncertainty and market volatility.
Highest perceived default risk
The sector’s dominance in deployment sits alongside a clear risk concern. The June 2026 EY Private Credit Pulse Survey found that investors identified real estate as the sector with the highest perceived default risk. Roads, energy and renewables, metals and manufacturing followed.
The report does not indicate that this perception has reduced real estate’s position as the largest deployment area. Instead, the data highlights the contrast between continued demand for private credit in the sector and investor caution over its risk profile.
| Private Credit Indicator | H1 2026 | H2 2025 |
|---|---|---|
| Total private credit investments | US$3.5 billion | US$3.4 billion |
| Real estate share of deal value | 35% | — |
| Healthcare share of deal value | 13% | — |
| Food & beverage share of deal value | 12% | 1% |
| US$10m–US$60m deals | 61% | 51% |
| Deals above US$120m | 18% | 27% |
| Domestic funds’ share of deal value | 74% | — |
| Domestic funds’ share of deal volume | ~79% | — |
| Investors expecting strong activity over next 1–2 years | ~73% | — |
Source: EY Private Credit Report H1 2026.
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Mid-sized deals gain ground
The broader market also saw a shift towards mid-sized transactions. Deals in the US$10 million to US$60 million range accounted for 61% of total deal value in H1 2026, compared with 51% in H2 2025. At the same time, transactions above US$120 million accounted for 18% of deal value, down from 27% in the previous period.
EY said the shift highlighted the growing prominence of mid-sized transactions, as lenders increasingly focused on targeted opportunities with stronger risk-return visibility.
Domestic funds were a major force behind the market. They accounted for 74% of total deal value and approximately 79% of deal volume in H1 2026. EY said domestic funds were increasingly identifying opportunities across refinancing, acquisition financing and special situations, particularly in the mid-market.
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Investor outlook remains positive
Despite the risk concerns, sentiment towards private credit remains constructive. Nearly 73% of respondents to EY’s survey expect market activity to remain strong over the next one to two years. Demand is being driven by stress-related situations, capital expenditure requirements and M&A financing needs.
About 33% of respondents targeted internal rates of return of 12% to 18%, while 67% preferred opportunities with IRRs above 18%. EY expects India’s private credit market to remain resilient over the next two to three years. Real estate is likely to remain an important deployment area, while infrastructure and other asset-heavy sectors could also emerge as key areas.
India’s private credit market is showing a notable contradiction in real estate: the sector attracted the largest share of private credit capital in the first half of 2026, even as investors viewed it as having the highest perceived default risk.
According to the EY Private Credit Report H1 2026, real estate accounted for 35% of total private credit deal value in H1 2026, making it the leading sector for deployment. Healthcare followed with 13%, while food and beverage accounted for 12%.
The strong allocation to real estate came as India’s overall private credit market remained resilient. Investments reached US$3.5 billion in H1 2026 across more than 100 transactions above US$10 million, broadly in line with US$3.4 billion recorded in H2 2025. Activity was supported by refinancing, holding company funding and acquisition financing despite global macroeconomic uncertainty and market volatility.
Highest perceived default risk
The sector’s dominance in deployment sits alongside a clear risk concern. The June 2026 EY Private Credit Pulse Survey found that investors identified real estate as the sector with the highest perceived default risk. Roads, energy and renewables, metals and manufacturing followed.
The report does not indicate that this perception has reduced real estate’s position as the largest deployment area. Instead, the data highlights the contrast between continued demand for private credit in the sector and investor caution over its risk profile.
| Private Credit Indicator | H1 2026 | H2 2025 |
|---|---|---|
| Total private credit investments | US$3.5 billion | US$3.4 billion |
| Real estate share of deal value | 35% | — |
| Healthcare share of deal value | 13% | — |
| Food & beverage share of deal value | 12% | 1% |
| US$10m–US$60m deals | 61% | 51% |
| Deals above US$120m | 18% | 27% |
| Domestic funds’ share of deal value | 74% | — |
| Domestic funds’ share of deal volume | ~79% | — |
| Investors expecting strong activity over next 1–2 years | ~73% | — |
Source: EY Private Credit Report H1 2026.
MUST READ: Can flex offices make REIT portfolios more resilient across market cycles?
Mid-sized deals gain ground
The broader market also saw a shift towards mid-sized transactions. Deals in the US$10 million to US$60 million range accounted for 61% of total deal value in H1 2026, compared with 51% in H2 2025. At the same time, transactions above US$120 million accounted for 18% of deal value, down from 27% in the previous period.
EY said the shift highlighted the growing prominence of mid-sized transactions, as lenders increasingly focused on targeted opportunities with stronger risk-return visibility.
Domestic funds were a major force behind the market. They accounted for 74% of total deal value and approximately 79% of deal volume in H1 2026. EY said domestic funds were increasingly identifying opportunities across refinancing, acquisition financing and special situations, particularly in the mid-market.
ALSO READ: 6 listed REITs, ₹3.17 lakh crore assets: How big is India’s REIT market now?
Investor outlook remains positive
Despite the risk concerns, sentiment towards private credit remains constructive. Nearly 73% of respondents to EY’s survey expect market activity to remain strong over the next one to two years. Demand is being driven by stress-related situations, capital expenditure requirements and M&A financing needs.
About 33% of respondents targeted internal rates of return of 12% to 18%, while 67% preferred opportunities with IRRs above 18%. EY expects India’s private credit market to remain resilient over the next two to three years. Real estate is likely to remain an important deployment area, while infrastructure and other asset-heavy sectors could also emerge as key areas.