Private equity investments in Indian real estate fell 41% year-on-year in H1 2025 to $1.7 billion across 12 deals, as the global economic environment marked by persistent inflation and tighter monetary conditions prompted many Western funds to adopt a cautious, wait-and-watch approach, leading to subdued activity in the sector, as per an assessment by Knight Frank India.
Despite the overall slowdown, the office segment remained the top performer, attracting $706 million in H1 2025, a 22% YoY increase, indicating a shift in global capital flows due 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.
Capital shifts from warehousing to residential and office
There was a shift in the composition of capital inflows as well. Western institutional capital receded further in H1 2025, primarily due to 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 mn invested across three transactions, marking a 22% YoY increase from $579 mn in H1 2024.
Rather than broad-based investment, 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 mn of total inflows. Mumbai received $115 mn, while Hyderabad drew modest but growing interest in plotted and villa-based developments, signalling expanding investor interest beyond traditional metros.
Retail real estate sector H1 2025 saw equity inflows reaching $481 mn in the sector. 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, it noted.
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The warehousing sector saw a sharp pause in H1 2025, with PE investments marking a 97% YoY decline to just $50 mn, down from $1.5 bn in H1 2024.
Mumbai leads in private equity investments
Regionally, in H1 2025, Mumbai led PE inflows with $468 mn, closely followed by Bengaluru at $453 mn. Kolkata $374 mn, Hyderabad $259 mn and Pune $134 mn also attracted meaningful capital, while Chennai received $50 mn. 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.