Private Equity Inflows into Indian Real Estate Decline 41% in H1 2025
Private equity investments in Indian real estate fell 41% year-on-year in H1 2025 to $1.7 billion across 12 deals, as global economic conditions prompted Western funds to adopt a cautious approach.
Private EquityReal EstateInvestmentKnight Frank IndiaEconomic ConditionsReal EstateJun 26, 2025
Despite the overall slowdown, the office segment remained the top performer, attracting $706 million in H1 2025, a 22% YoY increase. This indicates a shift in global capital flows due to elevated interest rates, tightening liquidity, and heightened investor focus on post-tax visibility, currency-adjusted returns, and execution over scale.
Domestic capital has stepped up substantially. Indian institutions accounted for 25% of total PE inflows during H1 2025, up from an average of 11% during 2011-2020, driven by deeper capital pools, regulatory stability, and maturing investment capabilities.
Regionally, Mumbai led the PE inflows with $468 million in H1 2025, while southern cities also recorded a notable surge in investments, Knight Frank India said in its analysis. The number of transactions also dropped sharply from 24 in H1 2024 to 12 in H1 2025, further reflecting increased selectivity in deal-making.
There was a shift in the composition of capital inflows as well. Western institutional capital receded further in H1 2025, primarily due to the narrowing India-US yield spread, Rupee depreciation (from 83.1 in Dec-23 to 85.6 per $ in H1 2025), and India’s 12.5% long-term capital gains tax, which affects post-tax returns, Knight Frank said.
While overall capital deployment across real estate declined due to global macroeconomic pressures, the office segment stood out with $706 million invested across three transactions, marking a 22% YoY increase from $579 million in H1 2024. This growth was fuelled by strategic allocations into high-quality, Grade-A assets in core markets. Investors showed a preference for larger, stabilised or near-stabilised office spaces with strong cash flow potential, often through joint ventures or REIT-aligned platforms.
In residential, Bengaluru and Pune dominated capital absorption, accounting for nearly $350 million of total inflows. Mumbai received $115 million, while Hyderabad drew modest but growing interest in plotted and villa-based developments, signalling expanding investor interest beyond traditional metros.
The retail real estate sector in H1 2025 saw equity inflows reaching $481 million. The growth was driven by two large transactions, including a stabilised mall acquisition in south India by a listed REIT and another institutional buyout in an eastern metro, signalling renewed investor confidence in operational retail assets.
The warehousing sector saw a sharp pause in H1 2025, with PE investments marking a 97% YoY decline to just $50 million, down from $1.5 billion in H1 2024.
Regionally, in H1 2025, Mumbai led PE inflows with $468 million, closely followed by Bengaluru at $453 million. Kolkata ($374 million), Hyderabad ($259 million), and Pune ($134 million) also attracted meaningful capital, while Chennai received $50 million. Together, South Indian cities captured over 44% of total investments, underscoring a sustained regional shift in institutional investor preference.
“The current global economic environment marked by persistent inflation and tighter monetary conditions has led many Western funds to take a cautious, wait-and-watch stance, resulting in subdued private equity activity in the real estate sector. In contrast, India’s commercial real estate market continues to show strong fundamentals, driven by the return to office, rising absorption levels, and strengthening rental values,” said Shishir Baijal, chairman and managing director, Knight Frank India.
“Similarly, the residential sector has seen year-on-year growth, and retail consumption remains steady, supported by overall economic momentum. These factors have encouraged investors to adopt a long-term outlook on the Indian market. As macroeconomic conditions in the West begin to ease, we expect global capital flows to return to Indian real estate, further supported by the country’s sustained growth and improving regulatory clarity,” said Baijal.
Frequently Asked Questions
What is the reason for the decline in private equity investments in Indian real estate?
The decline is primarily due to the global economic environment marked by persistent inflation and tighter monetary conditions, which has prompted many Western funds to adopt a cautious, wait-and-watch approach.
Which segment of the real estate market performed the best in H1 2025?
The office segment performed the best, attracting $706 million in H1 2025, a 22% YoY increase.
How has domestic capital contributed to the real estate sector in H1 2025?
Domestic capital has stepped up substantially, with Indian institutions accounting for 25% of total PE inflows during H1 2025, up from an average of 11% during 2011-2020.
Which cities led in private equity inflows in H1 2025?
Mumbai led with $468 million, followed by Bengaluru at $453 million, Kolkata at $374 million, Hyderabad at $259 million, and Pune at $134 million.
What is the outlook for future private equity investments in Indian real estate?
As macroeconomic conditions in the West begin to ease, there is an expectation that global capital flows will return to Indian real estate, further supported by the country’s sustained growth and improving regulatory clarity.
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