India's real estate financing landscape is undergoing a significant transformation, moving from a fragmented, NBFC-led model to a more institutional and diversified capital market. This shift is driven by banks, AIFs, REITs, private credit, and government-backed initiatives, according to a recent report by ANAROCK Capital.
The report, titled 'Powering the Next Decade: India’s Real Estate Finance Transformation Story', highlights that India's housing finance market, valued at over Rs 38 lakh crore, is projected to nearly double to Rs 77 lakh crore by 2029-30, growing at a CAGR of 15%. Individual home loans remain the largest component of real estate financing. Despite the influx of capital, the challenge remains in channeling funds beyond top developers and major metros to support affordable housing and smaller developers in Tier II and Tier III cities.
Affordable housing continues to face significant funding gaps, with an estimated requirement of 25 million additional affordable homes by 2030. Homes priced below Rs 40 lakh accounted for only 10% of new launches in Q1 2026, a sharp decline from 26% in 2021. Meanwhile, premium homes priced above Rs 1.5 crore made up 53% of new launches. More than 4.5 lakh stalled affordable and mid-income homes across over 1,500 projects require funding support of nearly Rs 55,000 crore.
“India’s real estate sector no longer faces a shortage of capital. The real challenge is whether this capital can reach beyond the top developers and major metros to fund affordable housing, smaller developers, and emerging Tier II & Tier III cities.”
Shobhit Agarwal, CEO, ANAROCK Capital
On the commercial real estate front, banks dominate financing, accounting for nearly 56% of overall lending, estimated at Rs 5.2 lakh crore. This lending is heavily concentrated in the Mumbai Metropolitan Region, NCR, and Bengaluru. Despite rapid growth, India's REIT market remains underpenetrated, with a combined market capitalization of six listed REITs crossing Rs 2 lakh crore, yet accounting for only 0.4% of the overall stock market capitalization.
Sectors such as data centres, warehousing, industrial real estate, logistics, and GCC-led office developments are expected to attract significant long-term capital. India's data centre capacity is projected to exceed 8 GW by 2030, with GCCs and technology occupiers potentially driving demand for nearly 1.2 billion square feet of office space by the end of the decade.
“Affordable housing remains underfunded and requires dedicated capital structures. India’s affordable housing problem is no longer a demand issue, but a structural capital allocation and financing architecture challenge.”
Vishal Srivastava, Head - Corporate Finance, Managing Director, ANAROCK Capital
Background
India's real estate sector has historically been dominated by non-banking financial companies (NBFCs), but recent regulatory reforms and increased institutional participation are reshaping the landscape. This transformation is crucial as the country faces a growing demand for housing and commercial spaces, driven by urbanization and economic growth.
Despite geopolitical uncertainties and global market volatility, India's strong domestic demand, infrastructure investments, regulatory reforms, and deepening capital markets provide a robust foundation for real estate growth in the coming years.
