What do private credit lenders actually check before funding a real estate project in India?

Private credit lenders underwriting real estate construction finance in India are not evaluating the project in isolation. They are evaluating the probability that the developer will complete it. The track record check goes deeper than most developers expect.

Lenders will examine the completion record of every project the developer has delivered in the last 5-7 years — not just whether they were completed, but whether they were delivered on time, whether customer payments were received as projected, and whether there are any ongoing consumer disputes or RERA complaints. A developer with three completed projects, two delivered late, and thirty RERA complaints presents a materially different risk profile than a developer with the same three projects delivered on time with clean RERA records.

The first thing a developer approaching private credit should do is compile a clean completion record — project name, sanctioned area, sold area, delivered date, and current RERA compliance status — for every past project. Lenders will find this information regardless. Presenting it proactively signals professionalism and speeds up due diligence.

India's private credit market reached USD 12.4 billion across 166 transactions in 2025, with real estate accounting for 42% of deal value in the second half of the year. That capital is not deployed uniformly across project stages. Lenders are significantly more comfortable funding projects where approvals are in place — land title, environmental clearance, building plan sanction, and RERA registration — than projects still in the pre-approval phase.

Category II AIFs, which are the most active private credit vehicles in real estate, typically require RERA registration as a minimum before deploying. They need to demonstrate to their own investors that the underlying project meets regulatory standards. Pre-RERA projects require significantly more negotiation and command higher coupon rates to compensate for the additional risk.

The practical implication: a developer who has completed approvals and can demonstrate customer pre-sales in the 25-35% range before approaching private credit will access significantly better terms than one in the pre-launch phase.

Real estate private credit in India is almost always secured lending. The security package typically includes a mortgage over the project land, assignment of future receivables, a personal guarantee from the promoter, and — in larger transactions — a pledge over the developer's shares in the project entity.

Loan-to-value calculations in private credit are conservative — lenders typically lend at 50-65% of the distressed value of the asset, not the market value. The distressed value is what a lender could realise from a forced sale in 12-18 months. In Tier 1 cities with liquid real estate markets, this discount to market value may be 20-30%. In Tier 2 cities or for more specialised asset types, it can be 40-50%.

A developer should know, before approaching any lender, what the distressed LTV of their project is — and what ticket size that LTV supports. Approaching a lender for ₹50 crore against a project that distressed-LTV supports ₹30 crore is a negotiation that will either fail or result in significantly worse terms than necessary.

Private credit lenders are not long-term investors. Their fund life is typically 5-7 years, and they need a clear mechanism to exit within that window. For real estate construction finance, the exit is almost always customer collections — as apartments or units are sold, the loan is repaid from sale proceeds.

Lenders will scrutinise the sales plan: what is the current sold percentage, what is the projected absorption rate based on comparable project sales in the micro-market, and what is the developer's marketing budget and channel strategy. A project with 40% pre-sales, a credible remaining absorption timeline, and a realistic marketing plan is straightforward to underwrite. A project with zero pre-sales and an optimistic absorption assumption is significantly harder to place.