Are India’s Commercial and Residential Real Estate Markets Thriving in H1 2025?

Mumbai, June 26 (NationPress) The private equity (PE) investment landscape in India’s office real estate sector during the first half of this year demonstrates a cautious optimism, bolstered by asset quality, prime locations, and visibility in long-term tenancy, as highlighted in a report released on Thursday.

In the April-June timeframe, PE investments in the Indian real estate sector reached $1.7 billion, distributed across 12 deals.

Despite a decrease in overall capital allocation within the real estate sector due to global macroeconomic challenges, the office segment distinguished itself with $706 million invested across three transactions in H1 2025. This represents a 22 percent increase from $579 million in H1 2024, according to the findings by Knight Frank India.

This growth is characterized not by widespread investment but rather by targeted allocations towards high-quality, Grade-A assets in key markets.

Investors showed a clear preference for larger, either stabilised or nearly stabilised office spaces with strong cash flow potential, often facilitated through joint ventures or platforms aligned with REITs.

A significant trend observed in H1 2025 was the nearly even distribution between investments in ready and under-construction assets, each accounting for roughly 50 percent of the total, as noted in the report.

“India’s commercial real estate market continues to demonstrate solid fundamentals, spurred by the return to office work, increasing absorption rates, and strengthening rental values,” stated Shishir Baijal, Chairman and Managing Director, Knight Frank India.

In a similar vein, the residential sector has experienced year-on-year growth, and retail consumption remains stable, buoyed by the overall momentum of the economy.

“These elements have prompted investors to maintain a long-term perspective regarding the Indian market. As macroeconomic conditions in Western nations start to improve, we anticipate a resurgence of global capital flows into Indian real estate, further enhanced by the country’s ongoing growth and clearer regulatory environment,” he added.

After a slowdown following 2017 due to regulatory changes like RERA and GST, the residential real estate sector has undergone a transformation in investment strategies. Although volumes in H1 2025 have not yet reached the highs of 2015-16, the nature of capital deployment has evolved, focusing more on structured and risk-mitigated approaches.

According to the report, a notable trend in H1 2025 was the resurgence of credit instruments, with 60 percent of the $500 million invested coming via debt structures, an increase from 40 percent the previous year. Institutional investors are showing a preference for collateral-backed investments.

Bengaluru and Pune led capital absorption, accounting for nearly $350 million of the total inflows. Mumbai attracted $115 million, while Hyderabad is slowly gaining traction in plotted and villa-based developments, indicating a growing investor interest beyond traditional metro cities, as highlighted in the report.