Private equity (PE) investments in India’s real estate sector witnessed a sharp 41% year-on-year decline in the first half of 2025, totaling $1.7 billion across 12 deals, according to the latest report by Knight Frank India. The downturn, compared to $2.96 billion across 24 deals in H1 2024, reflects a significant shift in global capital sentiment amid persistent macroeconomic headwinds.
Knight Frank attributes the contraction to a combination of elevated global interest rates, tightening liquidity, and increased investor scrutiny over post-tax and currency-adjusted returns. The narrowing India–US yield spread, rupee depreciation (from ₹83.1 to ₹85.6 per USD), and India’s 12.5% long-term capital gains tax have further dampened foreign investor appetite.
Western institutional capital inflows receded notably, with many funds adopting a cautious, wait-and-watch approach. In contrast, domestic capital surged, accounting for 25% of total PE inflows, up from an average of 11% during 2011–2020.
Segment-Wise Performance
- Office Segment: Defying the broader trend, the office sector attracted $706 million, marking a 22% YoY increase. Investments were concentrated in Grade-A, stabilised or near-stabilised assets in core urban markets, often through joint ventures or REIT-aligned platforms.
- Residential Segment: PE inflows halved to $500 million, with Bengaluru and Pune absorbing nearly $350 million. Mumbai accounted for $115 million, while Hyderabad saw growing interest in plotted and villa developments.
- Retail Real Estate: The sector drew $481 million, driven by two major transactions involving a stabilised mall in South India and an institutional buyout in an eastern metro.
- Warehousing: The segment saw a dramatic 97% YoY decline, with investments plummeting to just $50 million, down from $1.5 billion in H1 2024.
Regional Trends
Mumbai led PE inflows with $468 million, followed closely by Bengaluru at $453 million. Kolkata, Hyderabad, and Pune also attracted meaningful capital, while Chennai lagged with $50 million. South Indian cities collectively accounted for over 44% of total PE investments, indicating a sustained regional shift in investor preference.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, noted that while global macroeconomic conditions have subdued PE activity, India’s commercial real estate fundamentals remain strong, buoyed by the return to office, rising absorption, and stable rental yields. He expressed optimism that global capital flows may revive as Western economies stabilize and regulatory clarity in India improves.
The report underscores a broader structural shift in investor priorities—from scale and momentum to execution credibility, post-tax visibility, and governance standards. As the market recalibrates, Knight Frank suggests that future capital inflows will hinge on demonstrated performance rather than perceived potential.
- Residential Segment: PE inflows halved to $500 million, with Bengaluru and Pune absorbing nearly $350 million. Mumbai accounted for $115 million, while Hyderabad saw growing interest in plotted and villa developments.
- Retail Real Estate: The sector drew $481 million, driven by two major transactions involving a stabilised mall in South India and an institutional buyout in an eastern metro.
- Warehousing: The segment saw a dramatic 97% YoY decline, with investments plummeting to just $50 million, down from $1.5 billion in H1 2024.
Mumbai led PE inflows with $468 million, followed closely by Bengaluru at $453 million. Kolkata, Hyderabad, and Pune also attracted meaningful capital, while Chennai lagged with $50 million. South Indian cities collectively accounted for over 44% of total PE investments, indicating a sustained regional shift in investor preference.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, noted that while global macroeconomic conditions have subdued PE activity, India’s commercial real estate fundamentals remain strong, buoyed by the return to office, rising absorption, and stable rental yields. He expressed optimism that global capital flows may revive as Western economies stabilize and regulatory clarity in India improves.
The report underscores a broader structural shift in investor priorities—from scale and momentum to execution credibility, post-tax visibility, and governance standards. As the market recalibrates, Knight Frank suggests that future capital inflows will hinge on demonstrated performance rather than perceived potential.
