India's Wealthy Fuel Commercial Real Estate Boom Through AIFs

India's high-net-worth individuals (HNIs) and ultra-high-net-worth individuals (UHNIs) are increasingly investing in commercial real estate through Alternative Investment Funds (AIFs), driven by high rental yields and professional management.

Commercial Real EstateAif InvestmentsHni Investment TrendsHigh Rental YieldReal Estate BoomReal Estate NewsJul 09, 2025

India's Wealthy Fuel Commercial Real Estate Boom Through AIFs

Real Estate News:India's wealthy are quietly shifting gears—moving beyond luxury homes to tap into the booming commercial real estate market. This strategic move is primarily facilitated through Alternative Investment Funds (AIFs).

No, we’re not talking about a flashy penthouse in Dubai. The real real estate action among India’s wealthy is far more strategic—and closer to home. India’s High-Net-Worth Individuals (HNIs) and Ultra-High-Net-Worth Individuals (UHNIs) are increasingly diversifying beyond traditional real estate avenues like residential apartments or luxury properties abroad. The big opportunity? Commercial real estate, and they're accessing it not by direct ownership, but through the AIF route.

This shift is being driven by a mix of strong rental yields, growing institutional demand, and the desire for hassle-free, professionally managed investment exposure. “That’s one of the most significant trends we’re seeing right now,” says Karthik Athreya, Director and Head of Strategy - Alternative Credit at Sundaram Alternates. “HNIs and UHNIs are heavily leveraging the AIF route to get into commercial real estate. In fact, real estate is the single largest category for AIF investments, attracting roughly Rs73,903 crore just in the first nine months of FY25.”

What makes this trend even more compelling is the broad base of asset classes under commercial real estate—spanning not just office spaces but also logistics, retail, and residential developments—offering investors diversification along with attractive risk-adjusted returns. Athreya points out that India’s commercial property market has been on a strong upcycle, largely due to the GCC (Global Capability Centre) boom, with India now hosting over half of the world’s GCCs. This has led to record-high leasing activity, particularly in metros, boosting demand for quality office space.

“With leasing at decadal highs, there's a massive demand for quality office space,” he explains. “As an investor, one is looking at a regular income-generating asset, typically around an 8% rental yield, with an opportunity for 4–5% additional upside through annual appreciation and rent escalations.” Moreover, the AIF structure allows HNIs to avoid the operational burdens of directly owning commercial properties—something many high-net-worth investors find cumbersome.

“For a busy HNI, the AIF route is simply a ‘no-brainer’. It helps them sidestep all the headaches of direct ownership—like managing tenants, upkeep, and exits,” adds Athreya. “Instead, they get a slice of a professionally managed, diversified portfolio with target IRRs in the 15–18% range.”

The timing of this uptick in HNI participation is also noteworthy. With interest rates peaking and the possibility of softening on the horizon, many investors see this as an ideal time to lock in higher yields on commercial real estate assets. “There is a notable and growing interest among HNIs and UHNIs in India to participate in commercial real estate through AIFs, especially near the peak of the interest rate cycle—an ideal time to lock in high yields,” notes Sharad Mittal, Founder and CEO of Arnya RealEstates Fund Advisors. “We’ve seen increased participation in funds dealing with pre-leased commercial assets, warehousing, and similar segments.”

These segments are seen as stable, income-generating options with predictable cash flows—an attractive proposition at a time when market volatility remains a concern for direct equity investments.

Although the adoption of real estate-focused AIFs has been gradual, regulatory tailwinds are beginning to accelerate the trend, making it easier for fund managers to structure and offer real estate strategies through the AIF framework. “While the growth has been slow, it’s gradually picking up as the regulator is now approving RE-focused AIFs with well-defined structures,” explains Vinayak Magotra, founding team member at Centricity WealthTech.

According to Magotra, Category II AIFs now have better visibility and clarity, leading to increased confidence among both fund houses and investors. “Currently, real estate represents around 5–6% of total AIF allocations. Additionally, REITs and InvITs are finding their way into HNI portfolios, offering similar benefits with better liquidity,” he adds.

Indeed, even the listed REIT space has seen over Rs 22,000 crore from HNI and retail investors, demonstrating that real estate is becoming an essential component in long-term portfolios—whether via AIFs or REITs, a report from Sundaram Alternates Assets highlighted.

Whether it’s income stability, professional management, or exposure to India’s booming commercial infrastructure, HNIs and UHNIs are increasingly using the AIF route to access real estate in a smarter, more structured manner. AIFs provide access to commercial real estate opportunities that HNIs and UHNIs typically wouldn’t be able to evaluate or manage independently—particularly in complex segments like structured credit and special situations.

“The old model of buying an office or a shop and waiting it out is dying. Today’s HNIs want scale, diversification, and cleaner execution,” Ramashrya Yadav, Founder & CEO, Integrow AMC, said. “It’s not about owning a floor in a tower anymore, but actually about being part of something bigger, with institutional controls,” he said.

While residential stories and overseas investments may still dominate cocktail party chatter, the real wealth-building is happening behind the scenes, where strategic capital is quietly flowing into Indian commercial real estate—one AIF at a time.

Frequently Asked Questions

What are AIFs?

Alternative Investment Funds (AIFs) are private investment funds that pool capital from investors to invest in various asset classes, including commercial real estate. They offer a structured and professionally managed way to invest in real estate without the operational burdens of direct ownership.

Why are HNIs and UHNIs investing in commercial real estate through AIFs?

HNIs and UHNIs are investing in commercial real estate through AIFs due to high rental yields, professional management, and the opportunity to diversify their portfolios. AIFs provide a hassle-free, scalable way to access the commercial real estate market.

What is the current trend in the commercial real estate market in India?

India’s commercial property market is experiencing a strong upcycle, driven by the GCC boom, which has led to record-high leasing activity, particularly in major cities. This has increased the demand for quality office space and other commercial properties.

How do AIFs help HNIs avoid the operational burdens of direct real estate ownership?

AIFs are professionally managed, which means HNIs can invest in commercial real estate without dealing with the day-to-day management tasks such as managing tenants, maintenance, and exits. This makes it a more convenient and less time-consuming investment option.

What regulatory changes are supporting the growth of real estate-focused AIFs in India?

The regulatory environment for real estate-focused AIFs is improving, with better clarity and approval processes. This has increased confidence among fund managers and investors, leading to a gradual but steady growth in the adoption of AIFs for real estate investments.