PE Investments in Indian Real Estate Expected to Decline in H1 2025: Knight Frank
Private equity investments in the Indian real estate sector stood at USD 1.73 billion till June 15 this year, and are expected to see a sharp decline in the first half of 2025, according to Knight Frank India.
Real EstatePrivate EquityKnight FrankOffice SegmentInvestment TrendsReal EstateJun 26, 2025
The PE inflow in real estate stood at USD 2.96 billion in the first half of 2024. Knight Frank India attributes the expected decline in PE investments to a shift in global capital flows, driven by elevated interest rates, tightening liquidity, and increased investor scrutiny over risk-adjusted and post-tax returns.
The office segment has attracted the highest share of PE capital, totaling USD 706 million until June 15 of the 2025 calendar year. In the full 2024 calendar year, Indian real estate received USD 4.9 billion in PE investments. The sector saw a record PE inflow in 2018, reaching USD 7.8 billion.
Western institutional capital has receded further this year, primarily due to the narrowing India-US yield spread, the depreciation of the Indian rupee (from 83.1 in December 2023 to 85.6 per USD in H1 2025), and India’s 12.5% long-term capital gains tax, which impacts post-tax returns. Meanwhile, domestic capital has stepped up substantially, filling the gap left by Western investors.
This shift in investment patterns highlights the evolving dynamics in the Indian real estate market. While the sector continues to attract significant capital, the changing global economic landscape and regulatory environment are influencing investment decisions. Investors are now more focused on risk management and ensuring that their returns are robust and sustainable in the long term.
Knight Frank India’s insights provide a valuable perspective on the current state of the Indian real estate market. The company, a leading real estate consultant, offers comprehensive services and market analysis, helping investors make informed decisions. With the sector facing new challenges, the role of consultants like Knight Frank becomes even more crucial in navigating the complex investment landscape.
Despite the expected decline in PE investments, the Indian real estate market remains a significant destination for both domestic and international investors. The sector’s resilience and potential for growth continue to attract interest, even as market conditions evolve. As the year progresses, the focus will likely shift to identifying new opportunities and strategies that can deliver strong returns in a more challenging investment environment.
Frequently Asked Questions
What is the total PE investment in Indian real estate till June 15, 2025?
The total PE investment in Indian real estate till June 15, 2025, is USD 1.73 billion.
Why are PE investments in Indian real estate expected to decline in H1 2025?
PE investments are expected to decline due to elevated interest rates, tightening liquidity, and increased investor scrutiny over risk-adjusted and post-tax returns.
Which segment of the real estate market has attracted the highest PE capital?
The office segment has attracted the highest share of PE capital, totaling USD 706 million until June 15, 2025.
What factors are causing Western institutional capital to recede from the Indian real estate market?
Western institutional capital is receding due to the narrowing India-US yield spread, Indian rupee depreciation, and India’s 12.5% long-term capital gains tax.
How is domestic capital responding to the decline in Western institutional capital?
Domestic capital has stepped up substantially, filling the gap left by Western investors.
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