Private equity (PE) investments in India’s real estate sector witnessed a decline owing to global macroeconomic pressures, including high interest rates, tightening liquidity, and a sharper focus on risk-adjusted and post-tax returns.
The PE Investment decreased 41% year-on-year (YoY) in the first half of 2025. Total inflows stood at $1.7 billion across 12 deals, down from 24 transactions in the same period last year. The office segment, however, recorded a 22% YoY growth with $706 million invested, making it the most capitalized asset class during the period, showed data from Knight Frank India.
The rupee depreciated from Rs 83.1 per USD in December 2023 to Rs 85.6 in H1 2025, narrowing the India-US yield spread and impacting Western capital inflows. India’s 12.5% long-term capital gains tax also weighs on post-tax outcomes for foreign investors.
Amid this, domestic capital accounted for 25% of total PE inflows in H1 2025, up from an 11% average during 2011–2020. This increase is supported by growing institutional capabilities, regulatory clarity, and deeper local capital pools.
Regionally, Mumbai led PE inflows with $468 million, followed by Bengaluru with $453 million. Kolkata attracted $374 million, Hyderabad $259 million, and Pune $134 million. Chennai saw inflows of $50 million. South Indian cities accounted for over 44% of total PE investments, the report said.
According to Shishir Baijal, CMD, Knight Frank India, western funds have adopted a cautious approach due to persistent inflation and tight monetary conditions. He noted that India’s commercial and residential real estate markets continue to show stable fundamentals, encouraging a long-term view among investors.
Office sector investments in H1 2025 focused on stabilised and near-stabilised assets in core locations. Of the $706 million, around 50% was directed toward ready assets, and the remaining toward under-construction projects. Strategic joint ventures and REIT-linked platforms played a central role in transactions, the data showed.
The residential segment witnessed $500 million in PE inflows, with 60% deployed via credit instruments, a shift from 40% in the previous year. Collateral-backed structures were preferred. Bengaluru and Pune accounted for nearly $350 million of the total, while Mumbai saw $115 million. Hyderabad attracted interest in plotted and villa developments.
The warehousing segment saw a 97% YoY fall in PE investments to $50 million. Only one transaction was recorded, following seven years of consistent capital inflows worth over $10 billion since 2017.
Retail real estate recorded $481 million in H1 2025, led by two major transactions in south and east India. Since 2011, the retail sector has attracted $4.4 billion across 33 deals.
The report concludes that investor decisions are now influenced by post-tax clarity, execution credibility, and governance standards. Future capital flows will depend on demonstrated performance over perceived potential.
The PE Investment decreased 41% year-on-year (YoY) in the first half of 2025. Total inflows stood at $1.7 billion across 12 deals, down from 24 transactions in the same period last year. The office segment, however, recorded a 22% YoY growth with $706 million invested, making it the most capitalized asset class during the period, showed data from Knight Frank India.
The rupee depreciated from Rs 83.1 per USD in December 2023 to Rs 85.6 in H1 2025, narrowing the India-US yield spread and impacting Western capital inflows. India’s 12.5% long-term capital gains tax also weighs on post-tax outcomes for foreign investors.
Amid this, domestic capital accounted for 25% of total PE inflows in H1 2025, up from an 11% average during 2011–2020. This increase is supported by growing institutional capabilities, regulatory clarity, and deeper local capital pools.
Regionally, Mumbai led PE inflows with $468 million, followed by Bengaluru with $453 million. Kolkata attracted $374 million, Hyderabad $259 million, and Pune $134 million. Chennai saw inflows of $50 million. South Indian cities accounted for over 44% of total PE investments, the report said.
According to Shishir Baijal, CMD, Knight Frank India, western funds have adopted a cautious approach due to persistent inflation and tight monetary conditions. He noted that India’s commercial and residential real estate markets continue to show stable fundamentals, encouraging a long-term view among investors.
Office sector investments in H1 2025 focused on stabilised and near-stabilised assets in core locations. Of the $706 million, around 50% was directed toward ready assets, and the remaining toward under-construction projects. Strategic joint ventures and REIT-linked platforms played a central role in transactions, the data showed.
The residential segment witnessed $500 million in PE inflows, with 60% deployed via credit instruments, a shift from 40% in the previous year. Collateral-backed structures were preferred. Bengaluru and Pune accounted for nearly $350 million of the total, while Mumbai saw $115 million. Hyderabad attracted interest in plotted and villa developments.
The warehousing segment saw a 97% YoY fall in PE investments to $50 million. Only one transaction was recorded, following seven years of consistent capital inflows worth over $10 billion since 2017.
Retail real estate recorded $481 million in H1 2025, led by two major transactions in south and east India. Since 2011, the retail sector has attracted $4.4 billion across 33 deals.
The report concludes that investor decisions are now influenced by post-tax clarity, execution credibility, and governance standards. Future capital flows will depend on demonstrated performance over perceived potential.
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