New Frontiers in India’s Private Markets: Alternative Assets, Infrastructure Trusts, and Global Capital Flows

While traditional private equity and venture investing rebounded in 2024, an equally important story is unfolding in the alternative avenues of India’s private markets. Beyond typical PE-VC deals, investors are tapping into infrastructure investment trusts (InvITs), real estate investment trusts (REITs), private credit, venture debt, and other innovative structures to deploy capital. At the same time, global institutional capital, from pension funds to sovereign wealth funds, is flowing into India at unprecedented scale, reshaping LP strategies. These new frontiers are providing fresh opportunities for LPs seeking yield and diversification in India, and they signal the maturing and broadening of India’s private investment ecosystem in 2024-2025.

The Rise of Private Debt and Credit Funds

One of the most striking trends has been the meteoric rise of private debt investing in India. As banks remain conservative and many mid-sized companies face funding gaps, private credit funds have stepped in to fill the void. India-focused private debt fund assets under management (AUM) have surged 26x in a decade, from just $0.7 billion in 2010 to $17.8 billion in 2023. This exponential growth far outpaced other asset classes and established India as the leading private debt market in Asia-Pacific in terms of growth.

What’s driving the private credit boom?

First, India’s “missing middle” in finance. Many emerging companies cannot obtain sufficient credit from traditional banks due to limited collateral or high perceived risk. Private debt funds offer more flexible, cash-flow-based lending to these businesses, often in the form of high-yield debt, mezzanine financing, or structured credit. By tailoring solutions (e.g. revenue-linked loans or venture debt for startups), private lenders address needs banks can’t meet.

Secondly, regulatory changes have improved creditor confidence. The introduction of the Insolvency and Bankruptcy Code (IBC) in 2016 has significantly expedited recovery processes and boosted debt resolution outcomes in India. Faster and better recoveries reduce the risk for private creditors, attracting more capital into the space.

Additionally, global investors see Indian private credit as a way to earn attractive risk-adjusted returns uncorrelated to public markets. Yields on Indian private debt can range from low to high teens, often secured against cash-generating assets, which presents a compelling proposition in a low-yield global environment. It’s no surprise that big players are teaming up: in early 2024, Goldman Sachs and Abu Dhabi’s Mubadala announced a $1 billion private credit co-investment program with a focus on India. More global credit funds are either raising dedicated India vehicles or deploying through regional funds. The venture debt segment is also burgeoning, with Indian venture debt funds raising larger funds to provide loans to startups for working capital and growth, complementing equity financing.

For LPs, private credit in India offers portfolio diversification and steady yield. Many pensions and insurers, who may have constraints on pure equity, find Indian private debt a viable entry for tapping growth via credit. The rapid AUM growth indicates that LPs globally are overcoming past concerns and allocating to Indian private debt strategies, likely attracted by the strong performance and structural demand.

InvITs and REITs – New Vehicles Gain Traction

Another game-changer in India’s private market landscape is the proliferation of InvITs and REITs. These vehicles, which pool income-generating assets and list units for investors, have unlocked alternative routes for both developers to raise capital and investors to earn stable yields. In 2024, InvITs and REITs hit a significant milestone: India’s Economic Survey 2024 reported that REITs and InvITs together raised ₹39,024 crore in FY24, more than five times the amount raised in the previous fiscal year. This represents an explosion of activity, underpinned by regulatory support and investor hunger for yield assets.

The bulk of this fundraising came via infrastructure trusts, which have been used to monetize roads, power lines, telecom towers, and other assets. Over the last five years (2019–2024), InvITs have raised ₹1.11 lakh crore in India. In FY24 alone, flagship vehicles like the National Highways Infra Trust (sponsored by NHAI) raised fresh capital (over ₹8,000 crore in unit capital from marquee domestic and international investors along with ~₹10,000 crore in debt from domestic lenders). The government’s push to monetize infrastructure via InvITs, paired with tax incentives for InvIT investors, has greatly accelerated this trend.

REITs have also gained momentum, especially in the commercial real estate space. Since the first REIT listing in 2019, India now has four listed REITs (Embassy Office Parks, Mindspace Business Parks, Brookfield India REIT, and Nexus Select Mall REIT), which collectively own dozens of office parks, IT campuses, and malls. The Economic Survey noted that REITs raised ₹18,840 crore from 2019–2024 in India. Investor reception has been positive; for instance, Nexus Select REIT rallied nearly 31% in the last one year, outperforming the Sensex index. During the same period, Embassy Office Parks REIT and Mindspace Business Parks REIT gained 19% and 12%, respectively.

From an institutional investor perspective, InvITs and REITs provide a welcomed avenue to deploy capital into India’s infrastructure and property sectors with liquidity and transparency. These trusts must distribute 90% of cash flows, so they generate regular income, an attribute prized by pension funds and insurance companies. In 2024-25, with interest rates starting to fall, Indian InvITs and REITs tapped the debt markets aggressively, issuing over ₹178 billion in bonds in H1 2025 alone. This was triple the debt raised in the same period a year earlier, as declining yields made it cheaper to leverage and investors sought high-grade bond offerings from trust vehicles.

The appeal of InvIT/REIT bonds lies in their top credit ratings (often AAA) and the stability of the underlying cash flows (commercial property rents, toll collections, power tariffs, etc). These instruments offer a compelling blend of fixed-income stability and long-term growth, effectively combining infrastructure exposure with bond-like traits.

Global Institutional Capital Flows and Evolving LP Strategies

Underpinning all these trends is the fact that global institutional investors, including sovereign wealth funds, pension funds, and endowments, are ramping up their commitment to India’s private markets. Their strategies are shifting toward more direct involvement and varied asset classes, transforming the funding landscape.

Over the past decade, foreign sovereign and pension funds have exponentially increased investment in India. Many sovereign wealth funds now view India as a core allocation, not just an opportunistic play. For example, Abu Dhabi Investment Authority (ADIA) received approval in 2024 to set up a $4-5 billion fund based in India’s GIFT City for investing in Indian markets. Saudi Arabia announced a $100B investment aim, signaling long-term commitments. Crucially, global LPs are not just investing through funds. Many are increasingly preferring direct deals and co-investments in India.

Another strategic shift is seen in how global public investors are positioning around India’s capital markets. India’s weight in the MSCI Emerging Markets index hit a record 18% in 2024, second only to China. This has attracted passive flows and increased attention to India’s market reforms (such as lifting foreign ownership limits). Moreover, India’s inclusion in global bond indices (JPMorgan’s EM bond index from June 2024) is prompting large institutional bond investors to enter the Indian debt market. All these moves point to a broader trend: India is becoming a mainstream investment destination for big pools of capital, and institutions are adapting their mandates to not miss out.

Domestic institutions are also slowly joining the fray. India’s regulators have eased norms for insurance companies and banks to invest in Alternate Investment Funds (AIFs), and the national pension system is looking at private equity allocations. Family offices and ultra-high-net-worth individuals in India have ramped up allocations to PE/VC funds and direct startup investments as well. These developments expand the local LP base, though foreign capital still dominates large deals.

For LPs evaluating India now, a few considerations stand out:

• Broader Asset Class Mix: No longer is India access only via equity funds. One can invest through infrastructure trusts, private credit funds, real estate vehicles, and more, depending on risk/return preferences. A diversified approach capturing multiple asset classes can optimize exposure.
• Regulatory Support and Reforms: The government’s openness to foreign capital is clear, from tax exemptions to simplifying AIF regulations and setting up GIFT City for hassle-free fund domicile. These reduce friction for LPs and GPs.
• Due Diligence and Partner Selection: With many options (direct vs funds, local GPs vs global platforms), LPs are conducting deeper diligence on fund manager capabilities. Track record scrutiny has intensified; only those GPs who can prove consistent performance and robust governance are securing commitments in an increasingly competitive fundraising environment. LPs are also keen on partners who can navigate India’s still complex regulatory and operational landscape, hence the value placed on GPs’ local teams and expertise.
• Exit Pathways and Liquidity: The expanded routes to liquidity give LPs more comfort on eventual exits. Secondary markets for fund stakes are developing too. 2024 saw increased interest in GP-led secondary transactions and continuation funds for aging portfolios, providing liquidity options to investors.

Looking ahead, India’s private market “alternative” segments are poised for further growth. Private credit could evolve into specialized strategies (distressed debt, asset-backed lending, venture debt) as the market matures and interest rates remain moderate. InvITs/REITs are expected to proliferate; plans are underway for new InvITs in areas like data centers and renewable energy, and the pipeline of REITs includes retail and even warehouse portfolios.

Global capital will likely continue rotating into India. Major pension funds that were underweight are now actively exploring India-focused partnerships. The direction is clear: India is no longer an alternative market, but a key one, and alternative assets within India are becoming mainstream for forward-looking investors.

Frequently Asked Questions