Private equity investments in real estate fall 29% to USD 3.46 billion in 2025

Private equity investments in India’s real estate sector declined 29 per cent to USD 3.46 billion during the current calendar year, mainly due to lower fund inflows into housing and warehousing projects, according to real estate consultant Knight Frank India.

Private equity (PE) investments had stood at USD 4.9 billion in the preceding year. The sector had witnessed record inflows of USD 6.73 billion during the 2018 calendar year.

In an analysis released on Sunday, Knight Frank India said investor sentiment remained cautious during the year, impacting overall capital deployment across several asset classes.

Among different segments, office assets continued to attract the highest share of private equity investments. PE inflows into office real estate rose to USD 2 billion during the current calendar year from USD 1.85 billion in 2024. Office assets accounted for 58 per cent of the total private equity inflows in 2025.

Retail real estate also saw renewed investor interest, garnering USD 374 million during the year, compared to no inflows recorded in 2024.

However, private equity investments declined sharply in both housing and warehousing segments. The housing sector attracted USD 576 million in investments this year, down from USD 1,177 million in 2024.

Similarly, investments in warehousing parks dropped to USD 510 million in 2025 from USD 1,877 million in the preceding year.

Commenting on the trend, Knight Frank said, “The slowdown in private equity 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.”

The consultant added that the decline in PE investments came despite improvement in macroeconomic indicators such as GDP growth, interest rates and inflation. However, these factors did not realign quickly enough to support sustained capital deployment.

On the outlook for the coming year, Knight Frank Chairman and Managing Director Shishir Baijal said private equity investments in real estate could rise 28 per cent to 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,” Baijal said.

Knight Frank clarified that the analysis excludes investments through REITs and InvITs, as well as transactions in hospitality and data centre assets.