India's commercial, residential real estate market shows strong fundamentals in H1 2025
Mumbai: Private equity (PE) investment in India's office real estate sector in the first half this year reflected measured optimism, driven by asset quality, prime locations and long-term tenancy visibility, according to a report on Thursday.
PE investments into Indian real estate sector stood at $1.7 billion, spread across 12 deals in the April-June period.
While overall capital deployment across real estate declined due to global macroeconomic pressures, the office segment stood out with $706 million invested across three transactions in H1 2025, marking a 22 per cent increase from $579 million in H1 2024, according to the report by Knight Frank India.
Rather than broad-based investment, this growth was fuelled by strategic allocations into high-quality, Grade-A assets in core markets.
Investors showed a preference for larger, stabilised or near-stabilised office spaces with strong cash flow potential, often through joint ventures or REIT-aligned platforms.
A notable trend in H1 2025 was the near-equal split between investments in ready and under-construction assets — about 50 per cent each, said the report.
'India's commercial real estate market continues to show strong fundamentals, driven by the return to office, rising absorption levels, and strengthening rental values,' said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
Similarly, the residential sector has seen year-on-year growth, and retail consumption remains steady, supported by overall economic momentum.
'These factors have encouraged investors to adopt a long-term outlook on the Indian market. As macroeconomic conditions in the West begin to ease, we expect global capital flows to return to Indian real estate, further supported by the country's sustained growth and improving regulatory clarity,' he mentioned.
After witnessing a slowdown post 2017 due to regulatory shifts like RERA and GST, residential real estate has seen a transformation in investment strategy. While volumes in H1 2025 remained below the peak achieved in 2015-16, the nature of capital deployment has matured, with a sharper focus on structured and risk-mitigated approaches.
According to the report, a key trend in H1 2025 was the return to credit instruments – 60 per cent of the $500 million invested came through debt structures, compared to 40 per cent the previous year. Institutional investors preferred collateral-backed investments.
Bengaluru and Pune dominated capital absorption, accounting for nearly $350 million of total inflows. Mumbai received $115 million, while Hyderabad drew modest but growing interest in plotted and villa-based developments — signalling expanding investor interest beyond traditional metros, the report noted.
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