Private Equity Investments in Indian Real Estate Decline 41% in H1 2025: Knight Frank Report
Private equity investments in Indian real estate plummeted by 41% year-over-year to USD 1.7 billion in the first half of 2025, driven by global macroeconomic pressures. However, the office segment saw a 22% increase in investments.
Private EquityReal EstateKnight FrankIndiaInvestmentsReal Estate NewsJun 26, 2025
According to the report, this downturn is not merely cyclical but highlights a broader structural shift in global and domestic capital views of Indian real estate. Investors appear to be more focused on post-tax visibility, currency-adjusted returns, and credible execution over scale or momentum. The number of transactions also dropped sharply from 24 in H1 CY24 to 12 in H1 CY25, further reflecting increased selectivity in deal-making.
While overall capital deployment across real estate declined due to global macroeconomic pressures, the office segment stood out with USD 706 million invested across three transactions, marking a 22% Y-o-Y increase from USD 579 million in H1 CY24. The investments in the residential segment stood at USD 500 million, down 41% Y-o-Y.
Western institutional capital receded further in H1 CY25, primarily due to the narrowing India–US yield spread, rupee depreciation (from 83.1 in December 2023 to 85.6 per USD in H1 CY25), and India’s 12.5% long-term capital gains tax, which affects post-tax returns.
Meanwhile, domestic capital seemed to have stepped up substantially, as Indian institutions accounted for 25% of total PE inflows during H1 CY25, up from an average of 11% during 2011–2020. This growth was driven by deeper capital pools, regulatory stability, and maturing investment capabilities.
Shishir Baijal, chairman and managing director, Knight Frank India, said: “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. Similarly, the residential sector has seen year-on-year growth, and retail consumption remains steady, supported by overall economic momentum.”
The Indian warehousing sector saw a sharp pause in H1 CY25, with PE investments marking a 97% Y-o-Y decline to just USD 50 million, down from USD 1.5 billion in H1 CY24. Only one transaction was recorded, highlighting a temporary reassessment of growth expectations in a sector previously dominated by large, platform-level deals.
After a prolonged lull of over two years, India’s retail real estate sector in H1 CY25 saw equity inflows reaching USD 481 million. The growth was driven by two large transactions, including a stabilised mall acquisition in South India by a listed real estate investment trust (REIT) and another institutional buyout in an eastern metro.
“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,” Baijal added.
Frequently Asked Questions
What is the main reason for the decline in private equity investments in Indian real estate?
The main reason for the decline is global macroeconomic pressures, including persistent inflation, tighter monetary conditions, and the narrowing India–US yield spread.
Which segment of the real estate market saw an increase in investments in H1 2025?
The office segment saw a 22% increase in investments in H1 2025, with USD 706 million invested across three transactions.
How did domestic capital contribute to the real estate market in H1 2025?
Domestic capital 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.
What factors led to the decline in Western institutional capital in H1 2025?
The decline in Western institutional capital is due to the narrowing India–US yield spread, rupee depreciation, and India’s 12.5% long-term capital gains tax.
What is the outlook for global capital flows to Indian real estate in the future?
As macroeconomic conditions in the West begin to ease, global capital flows are expected to return to Indian real estate, supported by the country’s sustained growth and improving regulatory clarity.
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