PE Inflows in Indian Real Estate Drop 15% in 2025

Private equity (PE) investments in India’s real estate sector slowed in the first half of FY26, reflecting a cautious investment climate after several years of strong inflows. According to ANAROCK Capital’s latest FLUX report, total PE inflows fell 15% year-on-year to $2.2 billion, down from $2.6 billion in the same period last year.

The dip, analysts say, is less about declining investor confidence and more about timing and deal volume. While fewer large transactions were recorded, average deal sizes remained steady in the $60–100 million range, signaling that investors are still deploying meaningful capital, but more selectively.

Momentum Fades After Early Uptick

The first quarter of FY26 had hinted at a possible rebound, but that optimism faded in the next three months. “A stronger deal showing in Q1 appeared to present a glimmer of hope, though it was short-lived as activity subsided again going into the second quarter,” said Shobhit Agarwal, CEO of ANAROCK Capital.

Agarwal noted that the overall trend of declining inflows continues from the post-pandemic peak. PE investments have gradually fallen from $6.4 billion in FY21 to $3.7 billion in FY25, mirroring global tightening in capital markets and investor preference for stability over scale.

Market Becomes More Evenly Distributed

One key change highlighted in the FLUX report is the easing of deal concentration. The top 10 transactions accounted for 77% of total investments in H1 FY26, down from a steep 93% in the same period last year. This points to a more even spread of deals across cities and asset classes.

“FY25 had one unusually large transaction involving Reliance Group and ADIA-KKR. This year, we’re seeing less concentration and more mid-sized transactions,” said Aashiesh Agarwaal, Senior Vice President at ANAROCK Capital. The shift suggests that private equity is now flowing into a wider base of projects rather than being dominated by a handful of big-ticket deals.

Regional Leaders: Mumbai, Kolkata See Strong Gains

The Mumbai Metropolitan Region (MMR) emerged as the top destination for PE investments, its share jumping from 12% in H1 FY25 to 33% this year. The surge was largely driven by a major deal involving Kanakia, Hines, Mitsubishi, and Sumitomo. Kolkata also re-entered the spotlight, accounting for 17% of total investments, thanks to the sale of South City Mall to Blackstone — a deal for which ANAROCK acted as advisor.

These regional shifts indicate growing investor appetite beyond traditional office hubs. Cities with established retail and mixed-use assets are attracting renewed interest, especially from global investors seeking stable, consumption-led returns.

Changing Investment Priorities

The report highlights an evolving mix of assets drawing investor attention. Retail, mixed-use, commercial offices, hotels, and data centres all saw strong activity in H1 FY26. Commercial offices led the way, contributing about 40% of total inflows, followed by mixed-use projects at 19% and retail at 17%.

Interestingly, the industrial and logistics segment — once a magnet for institutional capital — saw no major transactions during this period. However, ANAROCK noted that several deals are under negotiation and could close in the coming months, driven by India’s growing e-commerce and consumption story.

Equity remained the preferred route for funding, accounting for 78% of all transactions, while debt made up the remaining 22%. The share of foreign capital rebounded to 73%, up from 65% in FY25, showing renewed global interest in India’s real estate market despite short-term caution.

Residential and Commercial Markets Stay Resilient

The residential segment continued its consolidation phase, with fewer new launches but steady investor appetite for quality assets. Equity-led investments, which had been scarce until recently, have returned, suggesting confidence in India’s housing demand.

Commercial real estate also remained robust. Leasing momentum was driven by global capability centers (GCCs) and co-working operators, pushing total office transactions to $869 million in H1 FY26 — more than double the average over the previous three half-year periods. Experts believe office assets will continue to draw investor interest due to stable occupancies and rising demand for flexible workspace.

Retail and REITs Lead the Comeback

Retail real estate was another standout performer. Strong operational performance supported two large retail deals — one by Nexus Select and another by Blackstone. With India’s consumption boom showing no signs of slowing, retail assets are expected to remain on investors’ radar.

Meanwhile, India’s REIT market had an eventful six months. REIT stocks rallied, gaining between 15–27% in value, while distribution yields held firm between 5–6%. H1 FY26 also saw the listing of India’s fifth REIT, Knowledge Realty Trust, which was oversubscribed 12.5 times.

Among key REIT transactions, Mindspace REIT acquired Q-City in Hyderabad for INR 4,960 crore, Nexus REIT bought the MBD Complex in Ludhiana for INR 5,310 crore, and Embassy REIT sold strata-owned blocks at Embassy Manyata for INR 5,300 crore.

SEBI’s recent reclassification of REITs as equities from hybrid instruments has further lifted sentiment, paving the way for greater institutional participation.