PE inflows into Indian real estate drop 23% YoY to $1.12b in H1 2026

PE investments in Indian real estate (realty) declined 23 per cent YoY in H1 2026, falling from $1,471 million in H1 2025 to $1,126 million in H1 2026, as capital allocation across asset classes reflected selective deployment under tighter financial conditions, according to a survey by Knight Frank India.

Factors such as taxation, currency movements, financing costs and relative yield spreads are playing a larger role in shaping investment decisions. In this environment, a market’s ability to attract and retain capital depends not only on its long-term fundamentals but also on how it performs in comparison to alternate investment destinations, says Shishir Baijal, CMD, Knight Frank (India).

The moderation was not uniform across sectors. Office assets continued to attract institutional capital, supported by strong occupier fundamentals and stable income profiles, while residential investments softened as investors adopted a more selective approach towards development-led opportunities. The absence of large platform transactions further weighed on activity in the warehousing and retail segments.

NCR emerged as the leading destination for PE investments in H1 2026, supported by a combination of office and residential transactions. The region continues to benefit from strong occupier demand, expanding infrastructure and the availability of institutional-grade assets. Investor interest remained concentrated in established markets with proven demand fundamentals, reflecting the broader preference for assets offering visibility of cash flows and execution certainty.

The moderation in PE investments has occurred despite broadly resilient market fundamentals, not because of weakening ones. Sector-level performance through H1 2026 bears that out.

India’s office market remains resilient, supported by sustained leasing activity across major markets. GCCs remain a key demand driver, supported by India’s large skilled workforce, cost competitiveness and growing strategic importance within global corporate operations. Leasing activity has remained elevated across major office markets, while the inventory of institutional-grade assets continues to rise. That demand strength shows up in capital allocation too. Office PE investment rose 33% YoY in H1 2026, the strongest performance across asset classes, with ready assets accounting for 75% of total office investment as investors prioritised visibility of cash flows and lower execution risk. Residential real estate has also become increasingly organised, with larger developers strengthening their market position. Improved balance sheets, greater transparency and stronger execution capabilities have supported continued institutional participation through development funding, platform investments and structured capital transactions.

The warehousing sector continued to benefit from structural drivers including e-commerce growth, supply-chain modernisation and manufacturing expansion, while organised retail strengthened alongside rising consumption and increasing formalisation.

Despite these structural tailwinds, neither sector recorded fresh PE transactions in H1 2026. The gap reflects a wait-and-watch posture and limited availability of institutional-grade opportunities during the period, not a change in long-term attractiveness.

Taken together, these trends confirm that the moderation in PE investment activity cannot be attributed to weakening real estate fundamentals.

PE investments in Indian real estate declined 23% YoY in H1 2026, extending the moderation seen since the post-pandemic investment cycle. The decline reflects a structural rise in global hurdle rates, compounded by near-term geopolitical uncertainty, rather than any weakening of India’s real estate story. Office continued to attract significant institutional capital on the back of strong leasing and GCC expansion; residential investment was selective; warehousing and retail saw a temporary pause rather than a reassessment of long-term attractiveness.

Taxation is the one lever in this picture that policymakers control directly. Section 10(23FE) and the 2026 G-Sec exemption both show that targeted relief can deepen institutional participation when it removes uncertainty for long-term capital.

India’s long-term real estate fundamentals remain firmly intact: urbanisation, economic growth, the institutionalisation of the sector and a growing stock of investment-grade assets are unchanged. The next phase of capital inflows is likely to be driven not by growth potential alone, but by the combination of strong fundamentals, policy attractiveness and the ability to deliver predictable, post-tax, risk-adjusted returns at scale.

I am selling my land and will reinvest in a new house. Is tax exemption available ? Please clarify. P Sudhir, Sharjah.

Yes. Under the Income Tax Act, 1961, there are provisions that help you either reduce or avoid tax. Section 54F gives relief when profits from selling any other long-term asset—such as land, gold or shares—are reinvested while investing in a residential property.

I have used local to invest in property in India. Is repatriation available to sell and invest in overseas property? Naveen Jagesha, Dubai.

For NRIs, in case of residential properties, repatriation benefit is applicable for up to two properties. However, repatriation is capped at $1 million per financial year if a property is purchased using funds from NRO irrespective of the number of properties sold. Beyond this threshold, RBI approval is needed.