Repo Rate Cuts May Drive HNI Investors Towards Real Estate AIFs
The Reserve Bank of India's (RBI) decision to reduce the repo rate by 50 basis points may lead to a decline in fixed deposit (FD) rates, potentially pushing high net-worth investors (HNIs) and ultra-high net-worth investors (UHNIs) towards Alternative Investment Funds (AIFs) and real estate investments.
RbiRepo RateAifsReal EstateHnisReal Estate NewsJun 06, 2025
They say this shift is likely to encourage these investors to explore alternative, potentially higher-return asset classes, such as Alternative Investment Funds (AIFs), which will further boost investments in the real estate sector.
AIFs are privately pooled funds that invest in non-traditional assets like private equity, hedge funds, and real estate. They offer niche, high-risk, high-reward opportunities.
Sunil Sisodiya, Chairman and CEO of Gurugram-based Neworld Developers, said that the RBI’s 50 basis point rate cut on June 6 comes at a time when investor interest in high-yield, lifestyle-led markets like Goa is already on the rise.
“With expectations of further repo rate reductions in FY26, traditional instruments like FDs, which are already hovering below 7.5 percent, are losing appeal, especially among HNIs and UHNIs. This shift is likely to push capital towards higher-return asset classes such as real estate-backed AIFs,” he said.
Sisodiya added that for developers launching premium projects, this changing capital sentiment is a strategic advantage, both in terms of attracting discerning investors and in boosting end-user demand through more affordable home loans.
The rise of AIFs has significantly transformed real estate financing in India, offering a crucial lifeline to projects struggling with funding and unlocking new opportunities for developers.
According to a report by real estate consultant ANAROCK, the sector has seen the maximum AIF investments, across all sectors, till the first nine months of FY25. At Rs 73,903 crore, it marks 15 percent of the total AIF investments across the board.
Ankur Jalan, CEO, Golden Growth Fund (GGF), a category II Real Estate focused AIF, said that the RBI’s move will boost consumption and investment.
“However, with expectations of further repo rate cuts in FY26 and the consequent decline in FD rates, savers and HNI/UHNI investors are likely to look for potentially high return-asset classes like AIFs,” he said.
Jalan added that diversification also reduces risks and improves returns, in most cases upwards of 15-20 percent. They also offer better flexibility and higher after-tax returns.
The ANAROCK research said that the number of active AIFs has grown 36-fold over the past decade - from 42 by March 31, 2013 to 1,524 as of March 5, 2025, with the commitment raised increasing five-fold since 2019.
“As FD rates decline following the repo and CRR cuts, HNIs and UHNIs are likely to explore AIFs for higher returns. Real estate and private credit AIFs may attract strong inflows, though investors must remain mindful of the elevated risk and illiquidity inherent in such strategies,” Bamasish Paul, co-founder Managing Partner and CEO of Etonhurst Capital Partners, said.
Rahul Singla, Director, Mapsko Group, also echoed similar voices and said that the RBI’s move signals a shift towards lower interest rates, which may make traditional savings instruments like FDs less attractive.
“As a result, HNIs and retail investors seeking better returns could increasingly explore AIFs for diversification and higher yield. In the real estate sector, the move enhances affordability and buyer sentiment, particularly in residential segments,” he said.
The move not only improves liquidity and reduces borrowing costs but also sends a clear signal for investors to reassess their capital allocation strategies, G Hari Babu, national president, National Real Estate Development Council (NAREDCO), said.
“With fixed deposit interest rates likely to decline further in response to the repo rate cut, traditional savers, particularly HNIs, family offices, and upper-middle-income investors, may start exploring more rewarding alternatives. Alternative Investment Funds (AIFs), real estate, and structured real estate-backed instruments are expected to see renewed interest,” he said.
Real estate, in particular, offers the dual benefits of capital appreciation and steady rental yields, making it a compelling option in a low-return environment, Babu said.
Frequently Asked Questions
What is the impact of the RBI's repo rate cut on fixed deposit (FD) rates?
The RBI's repo rate cut is likely to lead to a decline in fixed deposit (FD) rates, making traditional savings instruments less attractive to investors, especially high net-worth individuals (HNIs) and ultra-high net-worth individuals (UHNIs).
What are Alternative Investment Funds (AIFs)?
AIFs are privately pooled funds that invest in non-traditional assets like private equity, hedge funds, and real estate. They offer niche, high-risk, high-reward opportunities for investors.
How do AIFs benefit the real estate sector?
AIFs have significantly transformed real estate financing in India by providing crucial funding to projects and unlocking new opportunities for developers, especially in the premium and high-yield markets.
What are the potential returns from investing in AIFs?
AIFs offer potentially higher returns compared to traditional savings instruments, with returns often upwards of 15-20 percent. They also provide better flexibility and higher after-tax returns.
What are the risks associated with investing in AIFs?
Investing in AIFs comes with elevated risk and illiquidity. Investors must be mindful of these factors and should conduct thorough research and due diligence before making any investment decisions.
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