Credit: GeminiThe Alternative Finance Imperative in Portugal’s Growing Real Estate Market
Bank rigidity fuels alternative lenders as Portugal's market demands speed, flexibility, and willingness to price risk
October 31, 2025Real Estate
Written by:Helen Richards
Key Takeaways
- The Portuguese real estate market is experiencing exceptional growth and fiscal stability, but traditional bank lending is proving too rigid and slow for the evolving needs of developers.
- Alternative finance is rapidly filling the market gap by offering greater flexibility, speed, and a willingness to price and finance higher-risk stages of development.
- A cultural mismatch and high cost of alternative capital for smaller projects are key challenges to the broader adoption of new financing models.
The Portuguese real estate market is exhibiting remarkable strength, supported by the country’s solid economic growth projections, contained inflation, and significant strides in fiscal consolidation.
Crucially, the country's debt-to-GDP ratio has dropped substantially in recent years, while the improvement in its sovereign debt rating has made Portuguese 10-year bonds cheaper than French bonds, further attracting international capital.
The housing market, in particular, has seen phenomenal growth. During Q2 2025, the Portuguese house price index grew by 17.2% year-on-year - the fastest growth rate in the eurozone, which saw an average of 5.1%.
This explosive growth is fuelled by strong foreign demand, a chronic shortage of new supply, and investors seeking the relative safety of real estate over financial assets.
Such strong real estate growth comes with a rapidly changing financing landscape. Recent discussions among senior real estate leaders at GRI Institute’s Portuguese Debt & Alternative Finance Dynamics roundtable, co-hosted by BiG - Banco de Investimento Global, highlight the increasing necessity of alternative financing to power the sector’s next phase of growth.
Although traditional financing is reported to be cheaper than alternatives, this low cost comes with stringent standards and low leverage, which do not suit riskier or less conventional projects.
Another key challenge is the lack of willingness of traditional banks to provide capital during the crucial earlier stages of development, such as the licensing phase and project conceptualisation. Rather, they show a clear preference to lend only once the building is physically on-site, and significant risk has been absorbed by the developer.
Furthermore, traditional financing comes with rigid rules and slow processes; there is a fundamental lack of space for dialogue with banks, and decision-making processes are governed by inflexible internal "god algorithms", market players report.
Alternative lenders are also reported to be more willing to price risk of earlier stages of development, such as the licensing phase, typically viewing this risk and demand as a premium.
Unlike banks, alternative lenders are also able to offer higher leverage and are not bound by regulatory constraints, allowing them to finance a more diverse array of business clients and development models.
For smaller developers, this form of alternative finance provides a solution where project sizes are often too small, risky, or non-standard for large private credit funds or traditional banks, while also offering flexibility, scale, and innovation, enabling quick, simple, and remote access to capital, particularly for projects facing lengthy licensing delays that can span years.
While alternative lenders are providing a service by taking on high risk, the resulting high costs are often considered disproportionate, preventing many from fully adopting the solutions.
Furthermore, the established culture of real estate investors, who are accustomed to providing a personal guarantee to a bank in exchange for the full reward, is creating a cultural barrier to accepting the higher-cost and shared-risk model of alternative finance.
The consensus remains that the opportunity for alternative finance in the Portuguese real estate market is huge, given the limitations of the classic, regulation-bound banking system. Now, the industry must adapt by developing new skills and creating financing tools that can address the diverse and evolving needs of a market transitioning towards an industrialised model of development.
Thank you to our co-host BiG - Banco de Investimento Global, as well Alexandre David (Arrow Global), Marcelo Carmo Silva (BiG - Banco de Investimento Global), Pedro Coutinho (BiG - Banco de Investimento Global), Pedro Figueira (Cedrus Capital), and Ricardo Alexandre Martins Gomes Pereira (Hipoges) for their valuable contributions to the discussion at Portuguese Debt & Alternative Finance Dynamics.
The financing conversation continues at the upcoming annual GRI Credit Opportunities & RE Debt 2025, on 26th November in London.
Crucially, the country's debt-to-GDP ratio has dropped substantially in recent years, while the improvement in its sovereign debt rating has made Portuguese 10-year bonds cheaper than French bonds, further attracting international capital.
The housing market, in particular, has seen phenomenal growth. During Q2 2025, the Portuguese house price index grew by 17.2% year-on-year - the fastest growth rate in the eurozone, which saw an average of 5.1%.
This explosive growth is fuelled by strong foreign demand, a chronic shortage of new supply, and investors seeking the relative safety of real estate over financial assets.
Such strong real estate growth comes with a rapidly changing financing landscape. Recent discussions among senior real estate leaders at GRI Institute’s Portuguese Debt & Alternative Finance Dynamics roundtable, co-hosted by BiG - Banco de Investimento Global, highlight the increasing necessity of alternative financing to power the sector’s next phase of growth.
The Constraints of Traditional Lending
Traditional banking is struggling to meet the new demands of the dynamic real estate development sector. Developers are encountering a rigid system that is not built for the complexity and speed required today.Although traditional financing is reported to be cheaper than alternatives, this low cost comes with stringent standards and low leverage, which do not suit riskier or less conventional projects.
Another key challenge is the lack of willingness of traditional banks to provide capital during the crucial earlier stages of development, such as the licensing phase and project conceptualisation. Rather, they show a clear preference to lend only once the building is physically on-site, and significant risk has been absorbed by the developer.
Furthermore, traditional financing comes with rigid rules and slow processes; there is a fundamental lack of space for dialogue with banks, and decision-making processes are governed by inflexible internal "god algorithms", market players report.
Leading players in the Portuguese real estate market gather in Lisbon to discuss the alternative financing scene. (Credit: GRI Institute)
The Rise of Alternative Finance
The growing market space left by traditional banks for pre-construction and alternative financing is being aggressively filled by private credit funds and platforms, providing essential flexibility and speed.Alternative lenders are also reported to be more willing to price risk of earlier stages of development, such as the licensing phase, typically viewing this risk and demand as a premium.
Unlike banks, alternative lenders are also able to offer higher leverage and are not bound by regulatory constraints, allowing them to finance a more diverse array of business clients and development models.
Crowdfunding and Proptech: Democratising Access
Crowdfunding has been cited as a significant trend, consisting of using a platform to connect companies needing to raise money with a wide base of investors. This model is becoming an essential way for small-to-medium developers, as well as proptech companies, to secure finance.For smaller developers, this form of alternative finance provides a solution where project sizes are often too small, risky, or non-standard for large private credit funds or traditional banks, while also offering flexibility, scale, and innovation, enabling quick, simple, and remote access to capital, particularly for projects facing lengthy licensing delays that can span years.
The Challenge of Product Mismatch
Despite the real estate market’s momentum, a mismatch remains between the high cost of alternative finance and the expectations of developers, particularly for smaller projects.While alternative lenders are providing a service by taking on high risk, the resulting high costs are often considered disproportionate, preventing many from fully adopting the solutions.
Furthermore, the established culture of real estate investors, who are accustomed to providing a personal guarantee to a bank in exchange for the full reward, is creating a cultural barrier to accepting the higher-cost and shared-risk model of alternative finance.
The consensus remains that the opportunity for alternative finance in the Portuguese real estate market is huge, given the limitations of the classic, regulation-bound banking system. Now, the industry must adapt by developing new skills and creating financing tools that can address the diverse and evolving needs of a market transitioning towards an industrialised model of development.
Thank you to our co-host BiG - Banco de Investimento Global, as well Alexandre David (Arrow Global), Marcelo Carmo Silva (BiG - Banco de Investimento Global), Pedro Coutinho (BiG - Banco de Investimento Global), Pedro Figueira (Cedrus Capital), and Ricardo Alexandre Martins Gomes Pereira (Hipoges) for their valuable contributions to the discussion at Portuguese Debt & Alternative Finance Dynamics.
The financing conversation continues at the upcoming annual GRI Credit Opportunities & RE Debt 2025, on 26th November in London.