Private equity money did slowdown in India’s real estate market in 2025, but it did not disappear. Instead, it paused, recalibrated, and became more selective. That is the central takeaway from Knight Frank India’s latest report, Trends in Private Equity Investments in India: H2 2025, which shows a sector adjusting to global uncertainty while holding on to its strongest foundations.
According to the report, private equity investments in Indian real estate declined by 29 percent during 2025. The dip reflects a wider global reassessment of risk, returns, and execution timelines, rather than a loss of confidence in India itself. Investors were dealing with higher capital costs, tighter underwriting standards, and lingering questions around exits. Even as India’s macro picture improved, with steadier GDP growth, easing inflation, and a more predictable interest rate environment, capital did not rush back in.
Knight Frank’s analysis focuses strictly on private equity capital deployed across core real estate segments such as office, residential, retail, and warehousing. It excludes REITs, InvITs, hospitality, and data centres to offer a clearer view of true private equity activity. Platform-level investments are counted only in warehousing, and deals in other segments are recorded once capital is actually deployed.
Within this narrower lens, one trend stands out clearly. Office assets remained the anchor of private equity investments in 2025. Offices attracted 58 percent of total inflows, amounting to about USD 2 billion during the year. What makes this notable is that office investment volumes stayed broadly in line with the three-year average, even as overall investments declined. This consistency underlines continued investor conviction in office real estate, driven by scale, institutional ownership, and predictable rental income.
The slowdown across the broader market was driven by three interconnected factors. The first was the effective cost of capital, which remained high enough to temper risk-taking. The second was exit visibility, as uncertainty around listings, asset sales, and valuation benchmarks delayed deal closures. The third was valuation alignment, with buyers and sellers taking time to agree on pricing in a changed interest rate environment. Together, these factors slowed execution, even though operating performance in offices and retail assets remained resilient.
As a result, private equity investors stayed cautious through 2025. Instead of large, headline-grabbing equity cheques, capital increasingly flowed into downside-protected, income-focused structures. The emphasis shifted from chasing growth to preserving capital while waiting for clearer signals.
Residential real estate emerged as the second-largest recipient of private equity investments, accounting for 17 percent of total inflows. However, the character of these investments changed significantly. Investors moved away from pure equity exposure and leaned toward credit-led instruments. These structures offered contracted cash flows and stronger downside protection, while still allowing participation in the sector’s long-term growth. Equity investments were largely limited to de-risked projects with strong execution visibility.
Warehousing ranked third, drawing 15 percent of total private equity investments in 2025. Occupier demand in the segment remained robust, supported by e-commerce growth, supply chain formalisation, and rising manufacturing activity. However, the moderation in investment volumes was largely supply-driven. There were fewer stabilised, institutionally owned assets available, and investors became more conservative about build-to-core strategies due to higher financing costs.
Retail real estate, meanwhile, saw limited activity. After nearly two years of muted private equity participation, the sector recorded just one large transaction in 2025. As a result, retail accounted for only 11 percent of total private equity investments. Investors focused narrowly on assets that met strict criteria around scale, operating performance, and exit visibility. Secondary malls and repositioning-led opportunities struggled to attract capital.
Looking ahead, Knight Frank sees a gradual improvement rather than a dramatic rebound. Shishir Baijal, International Partner, Chairman and Managing Director of Knight Frank India, says the firm’s 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 percent year on year to about USD 4.4 billion in 2026.
This recovery, however, is expected to be measured. Office and logistics-led strategies are likely to benefit the most, while residential and retail investments will continue to favour structured, project-specific opportunities. As interest rates stabilise and underwriting confidence improves, capital deployment is expected to gather momentum from 2026 onwards, led by assets that offer clear execution pathways and durable cash flows.
2025 was not a year of retreat for private equity in Indian real estate. It was a year of restraint, discipline, and recalibration, setting the stage for steadier growth ahead.
