India's Private Equity Real Estate Investments See 29% Decline in 2025
Private equity investments in India’s real estate sector experienced a significant 29% year-on-year decline in 2025, amounting to approximately $3.5 billion, according to Knight Frank India’s latest report, Trends in Private Equity Investments in India: H2 2025. Despite the overall decline, office properties remained the primary draw, capturing 58% of total inflows at nearly $2 billion. This highlights continued investor confidence in income-generating commercial assets even amid global capital uncertainties.
Knight Frank attributed the moderation in PE activity to broader recalibration around the cost of capital, valuation alignment, and exit visibility, despite improving macroeconomic indicators such as GDP growth and inflation. “Investors showed caution in 2025, favouring downside-protected structures over large-scale equity deployment, reflecting a shift towards risk-conscious strategies,” an official from the consultancy noted. Residential real estate ranked second with a 17% share, but the nature of investment shifted significantly. Credit-led and structured instruments outpaced traditional equity allocations, as investors sought stable cash flows and projects with high execution certainty. “Investors are increasingly selective, preferring de-risked projects with predictable returns rather than speculative launches,” said an industry expert.
Warehousing accounted for 15% of total inflows, driven by e-commerce growth, formalisation of supply chains, and rising manufacturing activity. However, limited availability of stabilised institutional assets constrained total investment. Retail real estate remained subdued, registering only 11% of private equity inflows, marked by a single notable transaction after nearly two years of muted activity, reflecting cautious sentiment in the sector. Knight Frank’s analysis emphasised that PE investment volumes were shaped by structural and market-specific factors rather than broad demand shortfalls. “Office and logistics-led strategies are expected to remain the primary beneficiaries of renewed inflows, while residential and retail investments will continue to focus on structured, project-specific opportunities,” the report said.
Looking ahead, medium-term forecasts indicate potential recovery in PE deployment. Shishir Baijal, Chairman and Managing Director at Knight Frank India, commented, “Our models suggest private equity inflows could rise 28% year-on-year to nearly $4.4 billion in 2026, supported by government infrastructure spending, currency stability, moderating interest rates, and incremental office supply.” As India’s real estate sector matures, investors are likely to maintain a disciplined approach, targeting assets with clear execution pathways, robust income streams, and sustainable long-term returns. This trend reflects a market increasingly focused on transparency, accountability, and resilience in urban real estate investments.
