While capital became more selective, investors continued to engage with income-generating and downside-protected real estate strategies, reflecting a shift in deployment rather than a withdrawal from the market.
Total private equity investments in Indian real estate stood at $3.5 billion in 2025, with offices retaining their position as the preferred destination for institutional capital, showed data from Knight Frank India. Inflows declined 29% year-on-year, reflecting a more cautious investor stance amid higher capital costs, valuation mismatches and evolving exit visibility. However, the investment outlook remains robust.
“Our investment forecasting model points to a more supportive environment over the medium term. Based on assumptions around government capital expenditure, currency movement, inflation, interest rates and incremental office supply, private equity investments in Indian real estate are projected to rise by 28% year on year to around $4.4 billion in 2026. This recovery is expected to be measured, driven by selective growth rather than a broad-based return of risk capital,” said Shishir Baijal, International Partner, CMD, Knight Frank India.
Office projects emerged as the clear anchor for private equity investments during the year, accounting for 58% of total inflows with $2 billion invested in 2025. Office investment volumes remained broadly in line with the three-year average, highlighting sustained investor conviction in the sector’s income stability, scale and institutional depth.
“Office assets continue to stand out for their income visibility, scale and institutional depth, while structured and credit-led residential investments reflect a more mature and balanced approach to optimising yield while managing risk. As valuation expectations align and exit visibility improves, India remains a compelling long-term market for private equity, particularly in office and logistics assets backed by durable cash flows and strong occupier demand,” said Saurabh Rathi, MD & Co-head, Real Estate Funds, Motilal Oswal Alternates.
The moderation in private equity investments during 2025 reflects a recalibration across three interconnected dimensions including the effective cost of capital, exit visibility and valuation alignment.The assessment tracks private equity capital deployed across core real estate asset classes. Platform-level investments are included only for warehousing, while other segments are counted upon capital deployment. REITs, InvITs, hospitality and data centre transactions are excluded to maintain comparability across office, residential, retail and warehousing sectors.
While macro-economic conditions such as GDP growth, interest rates and inflation improved, these factors did not realign quickly enough to support sustained capital deployment. Slower valuation adjustments constrained deal execution, even as operating performance in office and retail assets remained robust. As a result, capital shifted toward downside-protected, income-focused structures rather than large-scale equity deployment.
Residential real estate ranked second, attracting 17% of total private equity investments in 2025. However, the nature of capital deployment shifted, with investors increasingly favouring credit-led instruments over pure equity exposure. Equity investments were largely limited to de-risked projects with clear execution visibility, as investors prioritised contracted cash flows and downside protection while retaining participation in long-term growth.
Warehousing emerged as the third-largest recipient of private equity investments, accounting for 15% of total inflows during the year. Occupier demand remained robust, supported by e-commerce expansion, supply-chain formalisation and manufacturing growth. The moderation in investment volumes was largely supply-driven, reflecting limited availability of stabilised, institutionally owned assets and a more conservative underwriting approach to build-to-core strategies amid higher financing costs.
Retail real estate saw limited private equity activity in 2025, marked by a single large transaction after nearly two years of muted participation. Consequently, the segment accounted for 11% of total private equity investments during the year, with capital deployment restricted to assets meeting strict criteria on scale, operating performance and exit visibility.
Office and logistics-led strategies are expected to remain the primary beneficiaries of renewed inflows, while residential and retail investments are likely to continue focusing on structured and project-specific opportunities. As interest rates stabilise and underwriting confidence improves, capital deployment is expected to gather momentum from 2026 onwards, led by assets offering clear execution pathways and durable cash flows.
