AIF Commitments Soar to Rs 14.2 Trillion; Fund Deployments Near Rs 6 Trillion
The Alternative Investment Fund (AIF) industry in India has seen a significant surge, with total commitments reaching Rs 14.2 trillion and fund deployments crossing Rs 5.72 trillion. Despite regulatory caps, the industry continues to attract high-net-worth individuals and family offices.
AifAlternative InvestmentPrivate EquityReal EstateHedge FundsReal EstateAug 28, 2025
The AIF industry has been experiencing a boom, driven by the increasing inclination of ultra-high-net-worth individuals and family offices to invest in high-yielding options. AIFs have gained traction due to their ability to diversify investments in early-stage startups, unlisted assets, and complex trading strategies. This has led to a 20% jump in total commitments to AIFs on a year-on-year basis and a 5% sequential growth.
AIFs are pooled investment vehicles designed for the niche segment with high entry investments. Recently, the market regulator has pushed for accreditation among investors for certain schemes, enhancing transparency and investor protection.
Category II AIFs, which focus on private equity, debt, and other unlisted assets, continue to dominate the segment with the highest commitments at Rs 10.78 trillion. However, there is a growing interest in Category III AIFs, which include hedge funds. According to a report by the Indian Private Equity and Venture Capital Association (IVCA), Category III AIFs accounted for 47% of the total launches this financial year so far.
In terms of investments, real estate is the largest sector, accounting for nearly 12.5%, followed by financial services, IT, non-banking financial companies (NBFCs), and banks. It is worth noting that in early June, the RBI, which has been cautious about the rapid growth of AIFs, capped cumulative investments by banks, non-banks, and all-India financial institutions at 10% of their corpus for any single entity exposure. This new directive will be in effect from January 1, 2026, and will apply to all banks, cooperative banks, non-banks, all-India financial institutions, and housing finance companies.
Moreover, the RBI has mandated 100% provisioning by the investing entity in case of a breach of the new investment caps, either individually or collectively. Despite these regulatory measures, the domestic alternative assets market, estimated at $400 billion in terms of assets under management (AUM), is projected to grow fivefold to $2 trillion over the next decade.
According to an India Brand Equity Forum report, the domestic AIF industry, which includes Category II and III funds and private credit funds, had commitments worth Rs 13 trillion or $150 billion as of December 2024. The global AIF industry is a little over $20 trillion. Of this, Category II AIFs, regulated by Sebi, including private equity, real estate, and distressed asset funds, comprised Rs 10 trillion. The private credit segment accounted for 15% of total AIF commitments at Rs 1.95 trillion or $22.39 billion.
As of May 2025, there are 1,550 registered AIFs in the country, and investment commitments into AIFs surged nearly 110% in fiscal 2025 over fiscal 2022. The industry is projected to surpass Rs 100 trillion or $1.15 trillion by 2030, reflecting the strong growth potential and investor confidence in this segment.
Frequently Asked Questions
What are AIFs?
AIFs, or Alternative Investment Funds, are pooled investment vehicles that cater to high-net-worth individuals and institutional investors. They invest in a variety of assets, including private equity, real estate, and hedge funds.
What is the current size of the AIF industry in India?
As of June 2025, the total commitments to AIFs in India have reached Rs 14.2 trillion, with funds raised approaching Rs 6 trillion and deployments crossing Rs 5.72 trillion.
What are the main categories of AIFs regulated by Sebi?
Sebi regulates Category II AIFs, which include private equity, real estate, and distressed asset funds, and Category III AIFs, which include hedge funds.
What regulatory changes have been introduced for AIFs?
The RBI has capped cumulative investments by banks and financial institutions in AIFs at 10% of their corpus for any single entity exposure. This new directive will be in effect from January 1, 2026.
What sectors are the largest recipients of AIF investments?
Real estate is the largest sector, accounting for nearly 12.5% of AIF investments, followed by financial services, IT, NBFCs, and banks.
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