Private equity investments into realty plunge 41%: Knight Frank

Bengaluru: Private equity (PE) investments in the Indian real estate sector reached $1.74 billion across 12 deals between January 1 and June 15, 2025, according to data by property consultancy Knight Frank out on Thursday. This marks a sharp decline by 41% from the PE inflow in real estate in the January to June period (H1) of 2024, which was at $2.96 billion.

This reflects a shift in global capital flows due to elevated interest rates, tightening liquidity, and increased investor scrutiny over risk-adjusted and post-tax returns, said the note.

The downturn is not merely cyclical but highlights a broader structural shift in global and domestic capital views of Indian real estate. Investors appear to be more focused on post-tax visibility, currency-adjusted returns and credible execution over scale or momentum.

The number of transactions also halved from 24 in H1 2024 to 12 in the period under review of 2025.

Western institutional capital inflows receded further in the period, primarily due to narrowing India-US yield spread, rupee depreciation, and India’s 12.5% long-term capital gains tax, which affects post-tax returns. Meanwhile, domestic capital stepped up, accounting for a quarter of the total PE inflows.

Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “The current global economic environment—marked by persistent inflation and tighter monetary conditions—has led many Western funds to take a cautious, wait-and-watch stance, resulting in subdued private equity activity in the real estate sector.” Still, Baijal expects global capital inflows to revive as macroeconomic conditions in the west ease.

Regionally, Mumbai led PE inflows with $468 million, closely followed by Bengaluru at $453 million. Together, South Indian cities captured over 44% of total investments, underscoring a sustained regional shift in institutional investor preference.

In terms of segments, residential saw $500 million invested in the period, marking a fall from $854 million in H1 2025. Bengaluru dominated with almost half of the total investments, amounting to $215 million.

On the other hand, the office segment saw a 22% year-on-year (YoY) growth with $706 million invested, attracting the highest share of PE capital (41%).

Office space demand also stayed strong as gross leasing rose 11% YoY to 17.8 million square feet across India’s top seven cities in the April to June period as of June 26, according to Colliers. Bengaluru led leasing activity during the period with a 27% share.