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Asia Pacific (APAC) real estate private credit is entering a pivotal phase. However, it is often misunderstood because it is viewed through the lens of global private credit rather than as a distinct market. Unlike corporate credit, this segment is grounded in asset-backed financing and secured collateral, with demand driven by rising refinancing needs, tightening construction funding and the continued retreat of banks from property lending.

Real estate private credit in APAC also sits within a broader global shift: private credit has grown more than fivefold since 2010 as investors seek excess yield through a more direct “farm-to-table” model that avoids syndication layers and allows returns to accrue more fully to end investors.

In APAC, these dynamics create a structural opportunity. Private lenders are increasingly stepping into areas where banks, constrained by regulation and capital treatment, cannot fully serve. As a result, real estate private credit is becoming a more established part of the region’s capital stack, attracting investors who value secured income streams and identifiable collateral. The appeal is reinforced by actual performance. Over the past two decades, private credit has delivered roughly twice the return of liquid loan markets and has outperformed even in years when equity markets faltered.

Yet misconceptions persist, many borrowed from broader private credit debates. Below are seven of the most common and why they fail to reflect the realities of APAC’s real estate credit market.
 

1. Real estate private credit is still in its infancy in APAC

While real estate private credit in APAC, accounts for about 6% of real estate financing (compared with 41% in the US and 21% in Europe), this low share reflects the long-standing dominance of banks in real estate lending, not a lack of market depth. In financial terms Australia alone, has seen its commercial real estate private credit market reach about A$85 billion at end-2024 and is expected to reach A$153 billion by 2028.

As banks scale back their lending due to regulatory and capital pressures, private lenders are filling a widening gap; a trend that is gaining rapid momentum.

 

2. Private credit in Asia is too illiquid or risky

This misconception applies poorly to real estate lending, which is secured by physical collateral and underwritten against asset-level cash flows such as leases or construction progress. Key jurisdictions, including Australia, South Korea and Singapore, have robust legal enforcement frameworks, providing clearer recoverability than corporate loans.

Leverage is also materially lower than in pre-GFC markets: where transactions once carried average 65–90% debt to capitalisation, average levels today sit closer to approximately 45%. A real estate collateral would need to lose more than half its value before senior secured lenders are impaired, a key reason why recoveries have historically been strong.

 

3. Too much capital is chasing too few deals

In APAC real estate credit, supply–demand dynamics run the other way. Banks have withdrawn meaningfully from construction lending and refinancing, creating a widening capital gap. Between 2024 and 2026, APAC faces an estimated US$8.4 billion refinancing shortfall. Rather than competing for limited opportunities, private lenders are meeting a structural need where capital demand exceeds traditional supply.

 

4. Defaults show private credit is inherently risky

Most headline defaults relate to unsecured corporate credit, not real estate lending. Real estate credit is backed by tangible collateral, enforceable step-in rights and ongoing monitoring throughout the loan term. Regulatory commentary in Australia has characterised the secured real estate lending market as low risk (CLI research). While defaults can occur, as in all credit markets, overall conditions remain stable: real estate valuations are firm, interest-coverage ratios are improving and public-market loan defaults have fallen since the start of the year.

 

5. Private credit should be viewed the same as private equity

Although both sit within private markets, the mechanics differ significantly. Real estate private credit delivers contractual income tied to leases, construction milestones or refinancing events, providing a degree of predictability not present in equity. The risk spectrum is broad, ranging from senior secured loans to mezzanine, special situations and non-performing loan strategies. Across all of these, collateral is the unifying feature; risk depends on structuring and capital-stack position, not whether the investment falls under the private credit umbrella.

 

6. Private credit is just another form of fixed income

Real estate private credit differs from standardised public bonds. It is bespoke and negotiated directly between borrower and lender, providing flexibility on covenants, repayment timing and capital deployment. Borrowers turn to private lenders because loans can be tailored and structured to meet current refinancing and development challenges. This direct-origination approach also removes the multiple intermediaries common in syndicated bank processes, allowing more returns to flow directly to investors seeking secured yield.
 

7. Limited transparency makes private credit high-risk

Transparency across APAC real estate private credit has improved and continues to be enhanced. Regulatory frameworks such as Basel III/IV and IFRS 17 are prompting banks to reduce real estate exposure while shifting financing activity toward institutional managers with more rigorous reporting, valuation and monitoring practices. Developed APAC markets also benefit from strong land-title systems and legal frameworks that support enforceability and visibility over collateral positions. As institutional participation grows, so does transparency. 

 

A clear and compelling opportunity for investors

APAC real estate private credit is developing along its own path, shaped by real assets, strong legal protections and a structural shift away from bank-dominated financing. Refinancing needs, construction funding gaps and the withdrawal of traditional lenders are driving sustained demand, while improved governance and reporting standards are strengthening confidence in the asset class. For investors seeking secured, contractual income backed by tangible collateral, this market offers a compelling combination of downside protection and long-term structural growth.

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