PE investments in Indian realty decline 41% in H1 2025, office segment sees selective growth
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.
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