Credit: Adobe StockData Centres, Domestic Funds, and the 'Financialisation' of Indian Real Estate
Exploring the pivot from owning 'hard assets' to investing in financial instruments and operational businesses
October 21, 2025Real Estate
Written by Jorge Aguinaga
Key Takeaways:
Profound shifts in capital and technology are redefining the Indian real estate sector, driving a wave of institutionalisation as new investment models emerge that move beyond traditional development. Two key trends synthesising the new capital playbooks are the rise of operationally-intensive assets like data centres and the significant "financialisation" of property, led by a new generation of domestic investors.
The sector is evolving at a breakneck pace, moving from simple IT company data centres to enterprise solutions and now "AI compute led data centres". This rapid evolution presents significant challenges, as GPU technology is changing every couple of months, potentially rendering a facility built last year "obsolete this year". This requires a modular approach to design, for both the GPUs and the cooling systems.
This operational intensity also extends to financing. The opportunity for traditional real estate credit is currently small, as most developments are financed by the "captive cash" of hyperscalers or substantial equity from funds.
While the capital investment is enormous - with an estimated 7 to 8 billion dollars needed for the one gigawatt of data centres becoming operational in the next year - it's a difficult system for private credit players to penetrate.
Within this trend, family offices and ultra-high-net-worth individuals are playing a pivotal role, but their approach is changing. A major evolution is underway as the "new generation" takes the helm, part of a massive generational wealth shift estimated at USD 1.3 trillion in India over the next five to seven years.
This new generation is moving away from the legacy model of holding hard assets and is instead embracing a "financialised real estate approach". They are strategically monetising legacy assets and reinvesting that capital back into real estate, but as a financial instrument rather than a physical one.
This "financialisation" is picking up pace, with new instruments and structures making it easier to invest. This was clearly illustrated by the change in REIT participation: the first REIT listing saw 90% participation from global investors, whereas the most recent listing saw 80% plus participation from domestic capital providers.
As these family offices scale, they are also adopting more institutional processes and governance frameworks for their investments.
As domestic capital increasingly institutionalises the sector, the new playbook is less about physical property and more about embracing operational expertise and sophisticated financial structures.
These strategic insights were shared during the closing session of the India GRI 2025 summit in Mumbai, which featured summaries and reflections from leading industry experts who had moderated discussions throughout the day. The panel providing these takeaways included Anuj Kapoor, Founder & MD of Upwisery; Balbirsingh Khalsa, Executive Director - Industrial & Capital Markets at Knight Frank India; Aseem Kohli, Director at Varde; Sandeep Kotak, MD & CEO of Mango Advisors; and Rao Munukutla, CEO & Executive Director at BACL.
Key Takeaways:
- Domestic capital, especially from family offices, is undergoing a structural shift toward financialisation over hard assets, moving towards investing in financialised real estate instruments like alternative investment funds (AIFs).
- The data centre boom is now seen as an operating business rather than a traditional real estate play, as the property itself accounts for 10% or less of the total cost.
- The Indian real estate sector is increasingly being institutionalised and funded by a rise in domestic capital, with AIFs alone raising over INR 70,000-80,000 crore in recent years.
Profound shifts in capital and technology are redefining the Indian real estate sector, driving a wave of institutionalisation as new investment models emerge that move beyond traditional development. Two key trends synthesising the new capital playbooks are the rise of operationally-intensive assets like data centres and the significant "financialisation" of property, led by a new generation of domestic investors.
Data Centres
Data centres are being re-evaluated as an asset class. The asset class is considered "hardly a real estate play now". This is driven by a simple cost breakdown: the physical real estate constitutes 10% or even less of the total asset cost. The true value and complexity lie in the "very strong operating layer".The sector is evolving at a breakneck pace, moving from simple IT company data centres to enterprise solutions and now "AI compute led data centres". This rapid evolution presents significant challenges, as GPU technology is changing every couple of months, potentially rendering a facility built last year "obsolete this year". This requires a modular approach to design, for both the GPUs and the cooling systems.
This operational intensity also extends to financing. The opportunity for traditional real estate credit is currently small, as most developments are financed by the "captive cash" of hyperscalers or substantial equity from funds.
While the capital investment is enormous - with an estimated 7 to 8 billion dollars needed for the one gigawatt of data centres becoming operational in the next year - it's a difficult system for private credit players to penetrate.
During the India GRI 2025 summit, experts concluded that new strategies in data centres, domestic funding, and 'financialisation' are redefining India's real estate playbook. (GRI Institute)
Family Offices & Financialisation
One of the most significant structural shifts is the growing institutionalisation of the real estate sector, driven largely by domestic capital. This trend is clearly reflected in the massive fund-raising by Alternative Investment Funds (AIFs), which have raised over INR 70,000-80,000 crore in recent years.Within this trend, family offices and ultra-high-net-worth individuals are playing a pivotal role, but their approach is changing. A major evolution is underway as the "new generation" takes the helm, part of a massive generational wealth shift estimated at USD 1.3 trillion in India over the next five to seven years.
This new generation is moving away from the legacy model of holding hard assets and is instead embracing a "financialised real estate approach". They are strategically monetising legacy assets and reinvesting that capital back into real estate, but as a financial instrument rather than a physical one.
This "financialisation" is picking up pace, with new instruments and structures making it easier to invest. This was clearly illustrated by the change in REIT participation: the first REIT listing saw 90% participation from global investors, whereas the most recent listing saw 80% plus participation from domestic capital providers.
As these family offices scale, they are also adopting more institutional processes and governance frameworks for their investments.
A Market Redefined
Taken together, these reflections point to a market being redefined. The reclassification of data centres as an "operating business" and the massive structural shift of family offices from "hard assets" to "financialised" instruments signal a new era.As domestic capital increasingly institutionalises the sector, the new playbook is less about physical property and more about embracing operational expertise and sophisticated financial structures.
These strategic insights were shared during the closing session of the India GRI 2025 summit in Mumbai, which featured summaries and reflections from leading industry experts who had moderated discussions throughout the day. The panel providing these takeaways included Anuj Kapoor, Founder & MD of Upwisery; Balbirsingh Khalsa, Executive Director - Industrial & Capital Markets at Knight Frank India; Aseem Kohli, Director at Varde; Sandeep Kotak, MD & CEO of Mango Advisors; and Rao Munukutla, CEO & Executive Director at BACL.