Over the last decade, Alternative Investment Funds (AIFs) have shown impressive growth in India, with a significant increase in the number of funds available. Out of all sectors, real estate stands out as the leading choice for AIF investments across the country.
Latest SEBI data compiled by ANAROCK Research indicates that out of a total of INR 4,49,384 Cr AIF investments made across sectors till H1 FY2025, real estate’s share was the highest at 17% - totalling nearly INR 75,468 Cr. Other sectors benefiting from AIF investments are IT/ITeS, Financial Services, NBFCs, Banks, Pharma, FMCG, Retail, Renewable Energy, and others.
AIF in India have seen substantial decadal increase in the number of funds available for investment. AIFs’ overall commitment raised rose by over 340% in the last six years – from INR 2,82,148 Cr in FY 2019 to INR 12,43,083 Cr in H1 FY2025, reflecting increasing appetite for alternative investment strategies.
Between FY2013 to FY2024, the commitment raised in AIF sector has maintained an impressive 83.4% compound annual growth rate (CAGR), signalling its growing importance in the broader investment landscape.
A deep dive into the data reveals that the surge in AIF activity is largely driven by Category II AIFs, which include a mix of Real Estate Funds, Private Equity, Debt Funds, and Fund of Funds (FoF. The data indicates that over the last five years, Category II AIFs have been responsible for nearly 80% of total AIF commitments, highlighting the dominance of these flexible and tailored investment vehicles.
Traditionally, domestic investors have been the primary source of AIF funding. However, foreign portfolio investors (FPIs) are also stepping up, especially in the case of Category II AIFs. In this category, FPIs now have an almost equal participation alongside domestic investors.
A major trend within AIFs is the growing reliance on equity financing to bridge gaps in the real estate sector. With many real estate projects requiring significant working capital throughout their lifecycle, AIFs have provided a vital source of funding. These funds offer a customized capital stack that addresses the unique needs of real estate developers, helping to manage everything from construction to long-term project financing.
In the first nine months of CY24 alone, the real estate sector saw INR 28,560 Cr raised through private equity investments, according to ANAROCK Capital. Real estate accounted for 17% of total sectoral investments this year. INR 12,801 Cr were also raised via Qualified Institutional Placements (QIPs) within the same period - again, the 2nd highest among all the major sectors and comprising a 17% overall share.
