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Executive Summary

Amid tighter financial conditions and higher regulatory constraints faced by traditional lenders, borrowers are turning to private credit for faster execution, flexible structures, and customised solutions.

Within this landscape, real estate (RE) private credit is emerging as a key growth segment, supported by APAC’s rapid urbanisation, rising refinancing needs, and evolving capital requirements.

RE private credit in APAC remains at an early stage relative to the United States (US) and Europe, however, the region offers significant headroom for growth. Fundraising has accelerated in recent years. A growing funding gap – driven by the refinancing of low-cost debt and more selective bank lending – is fuelling demand for non-bank capital across core-plus, value-add, and transitional strategies. As the asset class matures and institutional adoption deepens, early movers are well-positioned to benefit from attractive entry points, wider spreads, and long-term structural growth.

While market fragmentation and regulatory complexity remain key challenges, these barriers also create opportunities for experienced managers to capture outsized risk-adjusted returns. Developed markets such as Australia, South Korea, and Singapore offer compelling advantages, stemming from their transparent and robust governance and credit frameworks.

In an uncertain market environment that favours yield resilience and downside protection, APAC RE private credit stands out as a strategic allocation opportunity - one that blends stable income with differentiated access to one of the world’s most dynamic economic regions.

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Key Highlights:

APAC Private Credit - A Market Set to Take Off

APAC stands as the world’s largest credit market, valued at an estimated US$63 trillion, on par with the combined size of North America and Europe. Yet nearly 80% of total credit in the region is extended through traditional banking channels, creating systemic inefficiencies and limiting access to flexible capital for businesses, from refinancing to growth-stage funding¹.

APAC’s private credit market remains at a nascent stage compared to other regions (Figure 1). The asset class in APAC has long been associated with distressed debt and opportunistic lending, a legacy stemming from its origins during the Asian Financial Crisis in the late 1990s. Between 2010 and 2019, more than half of private credit fundraising in the region targeted special situations and distressed debts². This is also evident in return levels - median net Internal Rate of Returns (IRRs) for APAC private credit funds have historically outperformed North American and European credit funds³.

Fast forward to the present, performing private credit presents a compelling solution to APAC’s persistent capital inefficiencies. As traditional lenders retreat and borrowers seek faster and more tailored solutions, private credit is well-positioned to become a cornerstone of APAC’s evolving financial architecture.

Ample Room for Growth in APAC Private Credit

The sheer scale of APAC’s credit system creates a compelling backdrop for private credit expansion. 1% reallocation from traditional bank lending to non-bank channels would translate into an additional US$500 billion in the private financing sector. This highlights how even incremental shifts in credit flows can unlock enormous addressable market opportunities for private lenders.

APAC’s rapid urbanisation, rising capital demand, prolonged elevated interest rates, and increasingly risk-averse banks are key demand catalysts driving the sector’s growth (Figure 2).

Furthermore, institutional investors are increasingly valuing private credit’s diversification benefits amid rising correlations between equity and bond markets, a dynamic that targeted exposure to private credit is well-positioned to address. Overall, private credit is gaining traction as a defensive, yield-enhancing allocation.

While closed-end fund structures continue to dominate private credit fundraising, open-ended vehicles are emerging as a potential evolution in APAC. These funds offer greater flexibility for investors subscriptions and redemptions. However, they demand sophisticated liquidity tools, such as redemption gates, swing pricing, and queue management mechanisms, to ensure stability. If executed well, open-ended structures could expand the appeal of private credit to a broader investor base and help scale the asset class further.

Institutional capital in APAC is increasingly turning towards RE private credit, particularly where investments are aligned with scalable platforms or thematic strategies, rather than isolated transactions, allowing large allocators to deploy significant capital with strategic depth and repeatability.

APAC RE Private Credit Strategies to Reap Early Mover Advantage

APAC RE private credit presents an early mover advantage from both a structural standpoint and a tactical position. Structurally, despite recent momentum, private credit still accounts for only 6% of RE financing in APAC as of mid-2024, significantly below levels seen in more developed regions (41% in the US and 21% in Europe), where private lenders are firmly embedded in the capital stack⁴.

Moreover, much like the broader APAC private credit market, the majority of RE credit transactions in the region have historically focused on opportunistic or distressed scenarios, which would typically generate higher returns of 18-20%. Further down the risk spectrum, performing private credit strategies' returns range from 8-15% for core-plus/ value-add deals (Figure 3). Thus, the opportunity to deploy at scale in performing private credit remains largely untapped in APAC given the region’s robust structural drivers of outsized economic growth and urbanisation.

Tactically, in this early phase of APAC RE price recovery, private credit investors can still access attractive entry points with downside protection from potential asset appreciation. While interest rates have declined from their 2022 highs, they remain elevated relative to historical norms, sustaining favourable, though somewhat compressed, risk-adjusted returns. Lower fund borrowing costs also help preserve interest spreads. As rates continue to decline gradually, a rebound in RE investment activity is expected to boost demand for private credit in acquisitions, refinancings, and development projects.

Over the long term, the growth of APAC real estate private credit will be propelled less by market dislocations or rate volatility, and more by structural factors – including the rising sophistication of both lenders and borrowers, growing confidence underpinned by proven execution, and the gradual fading of the perception of private credit as capital of last resort.

Developed Markets in APAC: A Gateway for RE Private Credit

Institutional capital is gravitating towards markets where the rule of law is strong, credit frameworks are transparent, and lender protections are well-established. In APAC, Australia, South Korea and Singapore stand out as core developed markets for their varying degrees of market maturity and accessibility (Figure 4).

Australia
In Australia, RE is amongst the most attractive sectors for private credit investment⁵. As of end 2024, Australia’s commercial RE private credit market was estimated at approximately A$85 billion and is expected to almost double to A$153 billion by 2028⁶.

Borrowers are also drawn to private lenders for one-stop solutions and more tailored terms, such as higher loan-to-value (LTV) ratio, more flexible construction stage, despite higher interest margins.

For example, for one of CapitaLand Investment's (CLI) senior secured construction loans in Australia, we were able to offer up to 65% loan-to-cost initially and a 55% LTV upon stabilisation. Upon exit, when the project was fully stabilised, the developer refinanced with a bank at slightly lower LTV (low 50%) and lower cost. From a return perspective, the gross IRR on loan level was mid-teens leveraging CLI’s integrated credit platform that covers origination, risk and loan management in-house, with a focus on driving value through active asset management. Overall, Australia’s securities commission is supportive of private credit as liquidity risks are low and is working closely with industry players to establish best practices⁷.

From transitional financing to ground-up construction and recapitalisation, RE private credit has become increasingly important to project delivery across sectors, positioning Australia as the most mature and institutionally embraced RE private credit market in APAC.
 

South Korea
South Korea’s evolving regulatory landscape has played a critical role in both enabling and accelerating the growth of private credit. On the one hand, domestic banks have significantly curtailed lending to RE project finance, driven by policy initiatives aimed at cooling the property market and reinforcing financial system resilience. On the other hand, state-linked allocators such as Korea Post and local insurers have issued mandates to increase exposure to private credit⁸. These shifts signal regulatory openness towards foreign non-bank capital, as long as systemic stability is preserved.

Notably, the current market dislocation - marked by high levels of domestic corporate debts, challenges facing local lenders, and subdued RE sentiment - has opened a strategic window for foreign private credit investors. These participants are increasingly drawn to loan refinancing, development funding, and capital structure optimisation, often through partnerships with domestic platforms or their own licensed entities. With further tightening expected for local credit providers, opportunities remain abound for foreign investors to complement local lenders.
 

Singapore
Singapore's local banks dominate commercial RE lending⁹. Private credit RE strategy is mostly opportunistic in nature, with a focus on event-driven situations such as mergers and acquisitions, distressed recapitalisations, shareholder restructurings and value-add initiatives. As such, activity is concentrated in small, pure mezzanine plays and holding company lending, where capital is typically deployed to meet liquidity-driven needs, an area banks are less likely to support across the full capital structure. Asset managers could also leverage relationship with these local banks for collaborative deals.

With one of the highest concentrations of family offices and a RE market that is efficient, well-regulated and competitive, Singapore is well-positioned to capture more opportunities for RE private credit.

Conclusion

The APAC private credit landscape is shaped by a wide range of structural nuances. Transactions in the region are often privately negotiated, with lenders able to structure deals featuring robust security and creditor protections. These complexities, while offering the potential for attractive risk-adjusted returns, also present meaningful execution challenges. As such, success in this market hinges on aligning with experienced managers who have strong in-region expertise, deep local networks, and the operational agility to traverse heterogeneous and evolving credit environments.

This is even more pronounced in RE private credit, where navigating zoning restrictions, title risks, local developer dynamics, and shifting regulatory landscapes requires a high degree of sector-specific expertise. Investors seeking to access this space must partner with managers who not only understand regional credit markets but also bring deep RE knowledge and the capability to underwrite, structure, and monitor complex, asset-backed loans across the diverse APAC markets.

While investments in APAC RE private credit will continue to benefit from structural themes over the long-term, investors should act decisively to deploy capital now to negotiate favourable terms and lock in outsized spreads. 

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CLI scales private credit business

Amid the current macroeconomic environment, which has led to the bifurcation in investor demand between stability and upside, many limited partners (LPs) are seeking stable income-generating strategies such as core real estate and private credit to anchor portfolios and hedge volatility, while also demanding for upside from value-add and special opportunity funds that can capture dislocation-driven returns. 

CLI’s private fund platform, which encompasses our private credit and special opportunities business, is well-positioned to support this “barbell” allocation - offering opportunistic, and credit strategies through multi-investor funds, programmatic joint ventures, and bespoke mandates.

For example, CLI has committed more than S$500 million to build out our credit platform across APAC. In Sept 2024, CLI announced the close of its maiden credit fund, the Australia Credit Program (ACP), at A$265 million; and in May 2025, secured a 50% co-investment in A$625 million senior debt facility as seed asset for CapitaLand APAC Credit Program II  (ACP II). Our Korea Credit Program with Korea Investment & Securities, which has a total equity commitment of KRW180 billion, has been fully deployed. In addition, in June 2025, CLI completed its A$200 million acquisition of Wingate, one of the leading and largest private credit investment managers in Australia.  

CLI continues to expand our reach in private credit and opportunistic strategies. We are well-positioned to scale and institutionalise private credit strategies for global LPs. Our knowledge of Asia, combined with our investment expertise and flexibility in structuring solutions allows us to match capital with risk-adjusted opportunities across cycles, driving high-quality returns for investors.

This is echoed by Arjun Pandit, CLI's Managing Director of Private Funds (Credit) who spoke in a fireside chat at the Wingate Investor Forum 2025 (full video below).

CLI is a global real asset manager with a strong balance sheet, deep operating capabilities, and on-the-ground expertise in Asia Pacific. Our local teams allow us to source off-market deals and ensure strong execution, driving quality returns for our capital partners. 
Private credit now has a great opportunity to leverage that backbone and flourish.

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^{Notes
[1] Source: JLL – “Asia Pacific Debt: Non-bank Lenders Get in on the Act”, May 2024.
[2] Source: Preqin, June 2025.
[3] Median IRR for private credit funds vintage between 2013-2022 is 11.7% for APAC, 10.2% for North America and 9.0% for Europe. Source: Preqin – “Alternatives in APAC 2025”, June 2025.
[4] Source: PWC – “Emerging Trends in Real Estate Asia Pacific 2025”, November 2024.
[5] Source: Herbert Smith Freehills – “A Pulse on Private Credit Investment in Australia 2025”, April 2025.
[6] Source: Australian Prudential Regulation Authority – “April 2025 Quarterly Release”, April 2025; Foresight Analytics – “Australia’s Evolving Capital Markets: A Discussion Paper on the Dynamics Between Public and Private Market”, April 2025, CLI Private Credit, June 2025.
[7] Source: Allens – “ASIC’s Private Markets Push: What Industry Should Prepare For”, June 2025.
[8] Source: Asia Asset Management – " Korea Post Opens Tender For 150 Billion Won Private Debt Mandate”, February 2025, The Korea Economic Daily – “Korean Teachers’ Fund to Commit $495 mn to 10 PE Firms”, March 2025, The Korea Economic Daily – “Korean Investors Turn to Private Credit, Secondaries: CIOs”, May 2024.
[9] DBS, OCBC, and UOB collectively hold ~S$146B in Singapore CRE loans, representing ~83% of Monetary Authority of Singapore (MAS)-reported building & construction lending to residents. Source: MAS, respective banks, data as of Dec 2024.}