Private equity investments in Indian real estate fall 29% to $3.5 bn in 2025: Report

PE investments in Indian real estate fell 29% in 2025, led by offices with 58% share, as investors stayed cautious and favoured structured deals

Private equity (PE) investments in Indian real estate declined 29% year-on-year to about $3.5 billion in 2025, even as office assets continued to dominate investor interest, accounting for 58% of total inflows to about $ 2,001 mn, according to Knight Frank India’s report, Trends in Private Equity Investments in India: H2 2025.

Private equity investments in Indian real estate fell 29% to about $3.5 billion in 2025, with offices leading at 58% or around $2.0 billion, Knight Frank India said. (Represnetational Image)(Pexels )

Knight Frank said the moderation in PE activity reflected a broader recalibration around the cost of capital, exit visibility and valuation alignment, even as macro indicators such as GDP growth and inflation improved during the year.

Office properties attracted $2 billion during the year, broadly in line with the three-year average, underscoring sustained confidence in income-generating commercial assets despite a tougher global capital environment. Residential real estate ranked second with a 17% share of investments, followed by warehousing at 15% and retail at 11%, the report said.

Knight Frank’s Capital Markets report tracks private equity deployed across office, residential, retail and warehousing assets, excluding REITs, InvITs, hospitality and data centres, to provide a focused view of PE activity in the sector.

“Private equity investors remained cautious in 2025. Slower valuation adjustment constrained deal execution, even as operating performance in office and retail remained robust. Capital, therefore, shifted toward downside-protected, income-focused structures rather than large-scale deployment,” the report said.

Office assets continued to draw the bulk of investments due to their scale, institutional depth and stable cash flows. The segment’s ability to offer predictable income kept it at the centre of PE strategies in a year marked by higher financing costs and cautious underwriting, it said.

Structured capital lifts residential, 2026 outlook

The report said that residential real estate attracted 17% of total PE inflows in 2025, but the nature of investment changed materially. Investors preferred credit-led and structured instruments over pure equity bets, focusing on contracted cash flows and downside protection. Equity participation, Knight Frank said, was largely limited to de-risked projects with strong execution visibility.

Warehousing remained the third-largest segment, supported by demand from e-commerce, supply-chain formalisation and manufacturing. However, investment volumes were constrained by the limited availability of stabilized, institutionally owned assets.

Retail real estate saw limited investment activity in 2025, marked by a single large transaction after nearly two years of muted private equity participation. As a result, the segment accounted for just 11% of total private equity investments during the year.

Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India, said the medium-term outlook is improving. “Our investment forecasting model suggests private equity inflows into Indian real estate could rise about 28% year-on-year to nearly $4.4 billion in 2026, supported by government capex, currency stability, moderating inflation, interest rates and incremental office supply,” he said.

The report said that the recovery would be gradual and selective rather than a broad return of risk capital. “Office and logistics-led strategies are likely to remain the primary beneficiaries of renewed inflows, while residential and retail investments are expected to continue focusing on structured and project-specific opportunities. As interest rates stabilize and underwriting confidence improves, capital deployment should gather momentum 2026 onwards, led by assets offering clear execution pathways and durable cash flows,” it said.