Industry
Mint Primer: Why are PE investments in real estate falling in India?
Summary
Office space loses shine, warehousing picks pace; PE bets shift with foreign investors returning to India’s evolving real estate scene. Mint explains.Private equity (PE) investments in real estate have steadily declined in the last five years, mainly on account of lower fund inflow in office buildings. Compensating for the fall in office investments, funding in warehousing assets rose sharply. Mint explains:
How has funding in real estate fared?
PE investments in real estate have declined over the past five years, from $6.4 billion in 2020-21 to around $3.7 billion in 2024-25. The deal count also dropped, as per data by Anarock Capital. While the share of debt funding has increased since FY21, equity investments fell, indicating investors are unwilling to take risks. FY25 also saw hybrid deals (mix of debt and equity) surging to 42% of the total PE capital invested.
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The concentration of capital in fewer, larger transactions also increased significantly. In FY25, the top 10 deals accounted for 81% of total PE investment value, up from 69% in FY24.
Why have investments declined?
It was primarily driven by reduced foreign investor activity amid heightened global geopolitical volatility. Mature investors are being more selective and focusing on assets that assure long-term value. The commercial office sector, which has traditionally attracted most investments in real estate, saw a steep decline in investment—$806 million in FY25 versus $2.2 billion in FY24—despite robust leasing activity. This indicates investor caution. After a stellar run, the residential sector also saw a fall in average deal sizes. However, international equity interest is again emerging in this sector.
Why has warehousing gained favour?
In FY25, logistics and warehousing made up 48% of total investments, the highest in five years. Investors have shown more interest in the booming warehousing sector, with demand propelled by manufacturing, e-commerce and third-party logistics (3PL) growth. Global investors such as Blackstone Group are building their warehousing business here.
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Are foreign investors betting on India?
Though foreign institutional capital inflow into real estate has shrunk in the last five years, FY25 witnessed a surge. About 84% of the total funding was foreign investments, compared with 68% in FY24, Anarock Capital said. This revival highlights renewed global investor interest in real estate despite persistent macro volatility. The re-engaging is evident in some of the largest deals last year, such as Abu Dhabi Investment Authority and KKR’s investment in Reliance Retail Ventures’ warehousing assets.
What could pull up investments?
The pace of decline in funding has eased over the last two years. Despite global headwinds, real estate continues to hold strong, and strategic capital deployment is likely going forward. Beyond homes, office and warehouses, investors are likely to explore new asset classes such as data centres, which are gaining momentum. Besides the existing investors from US, Singapore and Europe, analysts expect investors from countries such as Japan and Korea to contribute more to the real estate investment pie.
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