Real Estate Sector Sees 122% Surge in Institutional Funding to $1.8 Billion in Q2
India's real estate sector witnessed a significant rebound in the second quarter of 2025, with institutional investments soaring by 122% to $1.8 billion, primarily driven by foreign investors and a focus on commercial assets.
Real EstateInstitutional InvestmentsForeign InvestorsCommercial AssetsGdp GrowthReal Estate NewsJul 07, 2025
The rebound was led largely by foreign investors from the US, Japan, and Hong Kong, who collectively accounted for around 89 per cent of the foreign inflows, primarily targeting commercial assets. Despite the impressive quarterly rise, the report noted that the inflows were still down 42 per cent year-on-year from the highest-ever quarterly investment recorded in the same period last year.
Foreign investments contributed $1.19 billion of the total, representing a 46 per cent annual drop and a decline in their overall share from 71 per cent in Q2 2024 to 66 per cent this year. According to Vestian, this shift is reflective of a more cautious outlook among foreign investors, who are now favouring co-investment models over direct ownership to minimise risk amid continued geopolitical tensions and global economic uncertainty.
Co-investments accounted for 15 per cent of total institutional investments in Q2, nearly double the 8 per cent share seen in the previous quarter. “While overall inflows remained lower on an annual basis, the substantial quarterly growth reflects renewed investor confidence supported by robust macroeconomic fundamentals and strong inherent demand,” said Shrinivas Rao, FRICS, CEO of Vestian. He added that the momentum is likely to continue into FY26, buoyed by projected GDP growth exceeding 6 per cent and recent repo rate cuts that are expected to lower borrowing costs and improve credit availability for the sector.
Commercial real estate attracted the major share of institutional capital in Q2, while residential properties accounted for only 11 per cent of the total inflows. The remaining investment was directed towards diversified asset classes. On the domestic front, investment activity remained subdued. Domestic investors contributed just 19 per cent of total institutional investments, compared to 21 per cent a year ago. In absolute terms, domestic inflows fell to $336 million, down 47 per cent year-on-year and 28 per cent lower than the previous quarter.
The report attributed the pullback in domestic investments to persistent uncertainty stemming from global conflicts and trade disruptions, which have impacted investor sentiment and risk appetite. Despite these challenges, the report sees scope for continued capital inflows in the coming quarters, particularly if macroeconomic indicators remain stable and supportive policy measures continue.
Frequently Asked Questions
What was the total institutional investment in India's real estate sector in Q2 2025?
Institutional investments into India’s real estate sector surged to $1.80 billion in the second quarter of 2025.
How much did foreign investments contribute to the total institutional investments in Q2 2025?
Foreign investments contributed $1.19 billion of the total institutional investments in Q2 2025.
Which segment of the real estate sector attracted the majority of institutional capital in Q2 2025?
Commercial real estate attracted the major share of institutional capital in Q2 2025, while residential properties accounted for only 11 per cent of the total inflows.
What factors are driving the renewed investor confidence in India's real estate sector?
Renewed investor confidence is supported by robust macroeconomic fundamentals, strong inherent demand, projected GDP growth exceeding 6 per cent, and recent repo rate cuts that are expected to lower borrowing costs and improve credit availability for the sector.
Why did domestic investments in the real estate sector remain subdued in Q2 2025?
The report attributed the pullback in domestic investments to persistent uncertainty stemming from global conflicts and trade disruptions, which have impacted investor sentiment and risk appetite.
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