Money raised for U.S. real estate grew while money raised for private credit fell sharply in the first nine months of 2026, according to Robert A. Stanger & Co. data reported by AltsWire on 23 October 2026. Real estate fundraising rose 18% to US$21.9 billion, while credit strategies fell 48% to US$42.5 billion. The real estate capital stack is the order in which everyone who funded a property gets paid, and it decides who carries the first loss when a deal goes wrong.
For an Indian investor weighing a private U.S. property, that order matters as much as the building. Two investors in the same property can face very different outcomes, depending on whether they are owed money or own what is left after everyone else is paid. The U.S. real estate market guide covers the property types and market conditions. The layers of money behind each property, and how U.S. interest rates reach them, deserve the same attention before money leaves India.
What a Real Estate Capital Stack Is
Most U.S. commercial properties are bought with a mix of borrowed money and owners' money, and the capital stack lists these sources from top to bottom. At the top sits the senior loan, usually from a bank, an insurance company or a lender that packages loans into bonds. At the bottom sits common equity, the money that the sponsor and its investors put in as owners. A sponsor is the real estate company that finds, buys and runs the property.
Between those two there can be one or two middle layers, called mezzanine debt and preferred equity. Not every deal uses them. A simple net lease building may have only a senior loan and common equity, while a larger or more stretched deal can have four layers. The order matters because cash flows down the stack from the top, while losses climb up it from the bottom.
A Familiar Example From Indian Home Loans
Indian investors already know this logic from a home loan. When a flat bought with a bank loan is sold, the bank is repaid the outstanding loan first, and the owner keeps whatever remains. If the sale price falls below the loan, the owner's money is gone before the bank loses anything. The same order applies to a U.S. apartment block or self-storage facility, only with more layers and more parties.
The difference is control. Investors in the bottom layer of a private U.S. deal usually do not decide when to sell. The sponsor runs the property, and lenders above the equity hold rights to take the property if the loan terms are broken.
How Each Layer Gets Paid and Who Absorbs Losses
Senior Debt
Senior debt has the first claim on rent and on sale proceeds, and it is backed by a mortgage on the property itself. In return, the lender accepts interest payments and no share of any gain. If the borrower defaults, the senior lender can foreclose, which means taking and selling the property to recover the loan.
Mezzanine Debt
Mezzanine debt is a second loan that ranks behind the senior loan. It is usually backed not by the building but by a pledge of the ownership interests in the company that owns the building. If the borrower defaults, a mezzanine lender can take over that company, and with it the property, subject to an intercreditor agreement, which is the contract that sets out the rights of each lender.
Preferred Equity
Preferred equity is an ownership stake rather than a loan, but it is paid before common equity. Its holders typically receive a fixed preferred payment and, in some deals, a share of profits, and their documents often let them take control of the property company if payments are missed. Because it is equity, it has no mortgage behind it and ranks below all debt.
Common Equity
Common equity is paid last. It receives what is left after interest, loan repayments and preferred payments, which is why it carries the most risk. It is also the only layer that keeps the full benefit if the property is sold for more than it owes. When a property's value falls, common equity absorbs the loss first, and the layers above start to lose money only after it has been wiped out.
Why Rising U.S. Rates Reach Each Layer Differently
On 16 September 2026, the Federal Reserve raised the federal funds target range by a quarter of a percentage point to 3.75% to 4%, saying that inflation “remains elevated”. Its policy committee meets again on 27 and 28 October 2026. Rate changes do not reach every layer of the capital stack in the same way.
A loan with a floating rate costs more as rates rise, so more of each month's rent goes to the lender before anything reaches the owners. A fixed-rate loan is protected until it matures, but the borrower then has to refinance at the rates of that day. In both cases the pressure lands first on common equity, because its holders are paid from what is left.
Higher rates can also lower property values, because buyers pay less for the same rent when borrowing costs more. Any fall in value is absorbed from the bottom of the stack upward. A property bought with a large loan has a thin layer of equity, so even a modest fall in value can consume much of it. The loan to value ratio measures how thick that cushion is.
The Stanger figures show where new money went in 2026, not how any of it performed. Investors choosing between private credit and property ownership are choosing between layers of similar stacks.
Where Indian Investors Usually Sit in the Stack
In most private U.S. property offerings, outside investors buy equity rather than lend money, so they share in the property's gains and losses. Indian investors and other offshore investors typically invest through a U.S. corporation, known as a blocker, which holds the property interest, and they typically receive Form 1042-S for their distributions. The tax guide for Indian investors in U.S. real estate explains how that structure is taxed in the U.S. and in India.
The blocker adds a step but does not change the order of claims on the property. Any lender to the property is still paid before cash moves up to the corporation, and only then to its shareholders. U.S. tax at the corporate level and withholding on distributions also come out before money reaches India, so the investor stands further down the line than a simple stack diagram suggests.
The useful question is therefore not only whether a property is good, but what sits above the investor's money. Offering documents set out the size of the loan, whether its rate is fixed or floating and when it matures. They also show whether any mezzanine debt or preferred equity ranks ahead of the equity, and what rights each layer holds if the plan goes wrong.
Risks and Limits of Each Position
No layer is free of risk. Senior lenders can lose money if a property's value falls below the loan, although they are the last to do so. Mezzanine lenders and preferred equity holders can be wiped out by a deep enough fall, and their rights to take control depend on documents that may be tested in court or in a negotiation with the senior lender.
Common equity carries the widest set of risks. Investors can lose some or all of their capital, distributions can be reduced or stopped while lenders are paid, and the investment is illiquid, with no ready market before the property is sold. A sponsor may ask investors for more money to cover a loan shortfall, and those who do not contribute can see their share diluted. Holding a single property also concentrates these risks, and for Indian investors the rupee value of any payment rises or falls with the exchange rate.
The stack also has limits as a tool. It shows the order of claims, not the quality of the building, the tenants or the sponsor. A deal with only senior debt and common equity can still fail if tenants leave, and a deal with several layers can work well under careful management. The structure tells an investor where losses land, not whether they will come.
Reading the Stack Before Reading the Story
The Stanger fundraising data and the Federal Reserve's September rate rise point to the same fact. The money behind a U.S. property is divided into layers with different claims, and rising rates squeeze those layers while losses arrive from the bottom up. For an investor holding common equity, that order shapes every outcome.
An Indian investor can therefore read any private U.S. property deal by starting with its capital stack. The size of the loan, the type of rate, the maturity date and anything else that ranks ahead of the equity, read together with the guide to U.S. property types and market conditions, give a clearer picture than the description of the building alone. Eligible investors can review how investing in U.S. real estate from India works on Raveum, including the property, sponsor, ownership structure, fees, risks and offering documents for each opportunity.
Frequently Asked Questions
What Is a Capital Stack in Real Estate?
A capital stack in real estate is the list of all the money used to buy a property, ranked by who gets paid first. Senior debt sits at the top, followed by any mezzanine debt and preferred equity, with common equity at the bottom. Cash flows down from the top, and losses are absorbed from the bottom up.
What Is the Difference Between Mezzanine Debt and Preferred Equity?
Mezzanine debt is a loan, usually backed by a pledge of the ownership interests in the company that owns the property. Preferred equity is an ownership stake that is paid before common equity but after all debt. Mezzanine lenders rank ahead of preferred equity holders, and the remedies each can use on default usually differ.
Who Gets Paid First When a Property Is Sold?
When a property is sold, the senior lender is repaid first, including the outstanding loan and any costs the loan documents allow. Mezzanine lenders come next, followed by preferred equity holders. Common equity investors receive whatever remains, which may be more than they invested, less than they invested or nothing at all.
Is Common Equity Riskier Than Lending to a Property?
Yes. Common equity absorbs the first loss when a property's value falls, and it is paid only after lenders and preferred holders. In exchange, it is the layer that keeps any gain above what the property owes. Equity investors can lose some or all of their capital, and the investment is usually illiquid until the property is sold.
Where Do Indian Investors Sit in a U.S. Property's Capital Stack?
In most private U.S. property offerings, Indian investors hold equity rather than lending money. They typically invest through a U.S. corporation, called a blocker, that holds the property interest. Any lender to the property is paid before that corporation, and U.S. tax is deducted before distributions reach the investor in India.
How Can You Check What Ranks Ahead of Your Investment?
Read the offering documents before investing. They should state the size of each loan, whether its rate is fixed or floating, when it matures, whether any mezzanine debt or preferred equity ranks ahead of the equity, and what rights each lender holds on default. A CA or financial adviser can help interpret the terms.
This article is for general education only and is not investment, tax or legal advice. Rules change and depend on individual circumstances. Investing in private real estate involves risk, including loss of capital, illiquidity, falling property values, distributions not being paid and currency movements. Participation is limited to non-U.S. persons under SEC Regulation S and verified U.S. accredited investors under Regulation D Rule 506(c), and offerings on Raveum are not open to the general public.
