Private equity investments in Indian realty dips 29% to $3.5 billion in 2025

Private equity investments in India’s real estate moderated in 2025 but sustained investor engagement. While total investment in real estate has been estimated at $3.5 billion in 2025, private equity investment declined by 29 per cent during the year.

PE investments in Indian real estate are projected to rise by 28 per cent YoY to approximately $4.4 billion in 2026, according to Knight Frank India’s latest report titled ‘Trends in Private Equity Investments in India: H2 2025’. Office assets emerged as the clear anchor for PE investments, attracting 58 per cent of total inflows in 2025 with US$ 2,001 million. Office investment volumes remained broadly in line with the three-year average, underscoring continued investor conviction.

Knight Frank India’s capital markets report adopts a focused private equity lens, tracking only capital deployed by PE investors across core real estate asset classes. Platform-level investments are included solely for warehousing, while transactions in other segments are recorded only once capital is deployed. The analysis does not include REITs, InvITs, hospitality and data centre transactions, ensuring a clear, comparable view of private equity activity across office, residential, retail and warehousing sector.

The slowdown in PE investments in Indian real estate during 2025, reflects a sharp recalibration across three interconnected dimensions, the effective cost of capital, exit visibility, and valuation alignment. 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.

Office assets continued to account for the largest share of PE investments during the year, reflecting their scale, institutional depth, and income stability. Residential emerged as the second-largest segment, driven primarily by structured capital deployments.

Residential real estate ranked second, drawing 17% of total PE investments during the year. However, the nature of capital deployment shifted meaningfully. Investors increasingly favoured credit-led instruments over pure equity exposure, prioritising contracted cash flows and downside protection while retaining participation in the sector’s long-term growth. Equity investments were largely confined to de-risked projects with clear execution visibility. Occupier demand remained robust in the warehousing sector. The sector remained the third largest recipient of PE investments in 2025, recording 15% of the share. This demand has been supported by e-commerce expansion, supply-chain formalisation and manufacturing growth. The moderation in investment volumes was largely supply-driven, reflecting limited availability of stabilised, institutionally owned assets and a more conservative underwriting approach to build-to-core strategies amid higher financing costs. Retail real estate saw limited investment activity in 2025, marked by a single large transaction after nearly two years of muted PE participation. As a result, the segment accounted for just 11% of total PE investments during the year.

According to Shishir Baijal, International Partner, CMD, Knight Frank India, Knight Frank’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, PE investments in Indian real estate are projected to rise by 28% year on year to approximately USD 4.4 billion in 2026. This recovery is expected to be measured, driven by selective growth rather than a broad-based return of risk capital,” said Baijal.

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 stabilise and underwriting confidence improves, capital deployment should gather momentum 2026 onwards, led by assets offering clear execution pathways and durable cash flows.

I own property in India and would like to avail of reverse mortgage loan after my return. What are the tax implications? Umesh Dialani, Sharjah.

For reverse mortgage, there is no tax implication as the Finance Act, 2008 has amended the law with the result it would not be treated as income. Any transfer of a capital asset would not be treated as a transfer and hence not subjected to capital gains tax. As a result, a borrower under a reverse mortgage scheme, will be liable to income-tax only at the point of alienation of the mortgaged property for recovery of the loan.

I have inherited family assets and my brother does not want a share in the property. How to ensure legal compliance to inherit the property. Vinod Sugandhi, Dubai.

Your brother will have to execute a release deed or a settlement deed in your favour. The legal document is of course subject to stamp duty and registration charges. You can also apply for a legal heir certificate and the tehsildar, after conducting an enquiry will issue a certificate mentioning the names of legal heirs who succeeded to the estate. With your brother’s release deed and legal heir certificate, you are in a legally sound position to either retain or sell the property at any stage.