As Asia Pacific’s real estate market adjusts to higher costs and tighter margins, a quieter but significant shift is taking place behind the scenes: private credit is steadily gaining relevance.
For developers, traditional bank financing no longer fits every project. For investors, equity returns are under pressure. Sitting in between is private credit — offering flexibility, speed, and customised structures that are increasingly aligned with today’s development realities.
Why private credit is gaining momentum
According to LaSalle Investment Management, private credit is attracting interest from institutional investors, family offices, and ultra-high-net-worth individuals who are seeking diversified exposure to real estate without taking full equity risk.
Several structural forces are driving this trend:
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Rising construction and development costs
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Limited correction in land prices
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Rent growth lagging behind cost inflation
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Banks remaining conservative in lending scope
As a result, debt positions are becoming more attractive relative to equity, especially when paired with downside protection and predictable income.
Infographic: Cost pressures reshaping development decisions 🏗️
📈 Construction cost increases (vs pre-pandemic levels)
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🇯🇵 Japan: +30%
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🇸🇬 Singapore: +35%
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🇰🇷 South Korea: +33%
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🇭🇰 Hong Kong: +23%
🏢 Developer response
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Shift from large-scale redevelopment
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More refurbishment, conversion, and adaptive reuse
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Smaller projects with tighter margins
💰 Financing impact
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Many projects fall outside standard bank lending criteria
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Growing need for bespoke and flexible capital
Where banks stop, private credit steps in
Asia Pacific’s real estate lending environment remains bank-dominated, particularly for low-risk, stabilised assets. Senior loans and core investments continue to be firmly within the banks’ comfort zone.
However, private credit finds opportunity in areas banks typically avoid:
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Construction financing
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Transitional or repositioning assets
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Mezzanine and structured credit
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Situations requiring speed or flexibility
As LaSalle notes, these “less senior” or higher-risk layers of the capital stack are exactly where non-bank lenders can play a meaningful role, helping projects move forward rather than stall.
Country-by-country: uneven but growing opportunities
Private credit’s role varies widely across Asia Pacific markets.
🇦🇺 Australia
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Private credit funding: ~A$50 billion today
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Forecast to grow to ~A$90 billion by 2029
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Funds over 25% of residential construction
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Strong preference for residential build-to-sell projects
Australia stands out as the most mature private credit market in the region, partly due to banks pulling back from commercial real estate exposure.
🇰🇷 South Korea
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Private credit active in logistics and data centres
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These sectors benefit from agile, non-bank financing
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Complexity and timelines suit bespoke structures
🇯🇵 Japan
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Entry remains challenging
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Strong domestic banks and intense competition
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Ultra-low rates still favour traditional lending
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However, mezzanine and bespoke financing is slowly emerging for sponsor-backed deals
Knight Frank describes private credit in Asia Pacific as “complementary and cyclical”, working alongside banks rather than displacing them — unlike in Western markets.
Development isn’t disappearing — it’s becoming selective
LaSalle’s ISA Outlook 2026 highlights that new supply across industrial, retail, and office sectors is expected to remain below long-term averages in most Asia Pacific markets.
This reflects:
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Developer caution
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Tighter financing conditions
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Higher construction costs
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More disciplined capital deployment
That said, opportunities still exist — particularly in sectors with clear rental growth or long-term demand drivers:
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Hospitality
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Residential and living sectors
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Logistics in selected sub-markets
In today’s environment, success hinges less on scale — and more on adaptability, both in asset strategy and financing structure.
What this means for Singapore and the region
For markets like Singapore, where construction costs have risen sharply and land prices remain firm, private credit offers an alternative pathway for projects that may otherwise struggle to pencil out under conventional bank terms.
While not a replacement for banks, private credit is becoming an important supporting pillar — especially for developers navigating tighter margins and evolving asset strategies.
Summary: Key takeaways ✅
✅ Private credit is gaining traction as equity returns face pressure
✅ Rising construction costs are reshaping development strategies
✅ Banks remain conservative, creating gaps in financing
✅ Private credit fills higher-risk, flexible, and transitional needs
✅ Opportunities are selective and market-specific across Apac
Final thoughts & call to action
Whether you’re a developer, investor, or property owner, financing strategy matters more than ever in today’s market. Understanding how capital is evolving can be just as important as choosing the right asset.
If you’d like to discuss how these trends may affect local projects, redevelopment opportunities, or future positioning, feel free to reach out — happy to share insights and perspectives.