PE Inflow in Indian Real Estate at $1.73 Billion, Expected to Drop in H1 2025: Knight Frank
Private equity (PE) investments in the Indian real estate sector stood at USD 1.73 billion till June 15, 2025, and are expected to decline sharply in the first half of the year, according to Knight Frank India.
Real EstatePrivate EquityKnight FrankInvestmentsIndiaReal Estate NewsJun 26, 2025
The real estate consultant, Knight Frank India, attributed the likely fall in PE investments to a shift in global capital flows due to elevated interest rates, tightening liquidity, and increased investor scrutiny over risk-adjusted and post-tax returns.
The office segment attracted the highest share of PE capital at $706 million till June 15 of the 2025 calendar year. Indian real estate received $4.9 billion in PE investments in the full 2024 calendar year, with the sector attracting a record PE inflow of $7.8 billion in 2018.
Knight Frank noted that western institutional capital has receded further this year, primarily due to the narrowing India-US yield spread, Indian rupee depreciation (from 83.1 in December 2023 to 85.6 per $ in H1 2025), and India's 12.5 percent long-term capital gains tax, which affects post-tax returns. Meanwhile, domestic capital has stepped up substantially.
Despite the challenges, the real estate sector remains a significant driver of the Indian economy, with various segments such as residential, commercial, and retail continuing to attract both domestic and international investors. The cautious approach by investors highlights the need for robust risk management and strategic planning in the face of economic uncertainties.
Frequently Asked Questions
What was the PE investment in Indian real estate till June 15, 2025?
Private equity (PE) investments in the Indian real estate sector stood at $1.73 billion till June 15, 2025.
Why are PE investments in Indian real estate expected to drop in H1 2025?
PE investments are expected to drop due to elevated interest rates, tightening liquidity, and increased investor scrutiny over risk-adjusted and post-tax returns.
Which segment attracted the highest share of PE capital in the first half of 2025?
The office segment attracted the highest share of PE capital at $706 million till June 15 of the 2025 calendar year.
What factors have led to the recession of western institutional capital in the Indian real estate sector?
The factors include the narrowing India-US yield spread, Indian rupee depreciation, and India's 12.5 percent long-term capital gains tax affecting post-tax returns.
How has domestic capital responded to the challenges in the real estate sector?
Domestic capital has stepped up substantially in response to the challenges in the real estate sector.
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