Market Radar India: Real estate attracts USD 1.64 billion in institutional investment

Real estate attracts USD 1.64 bi in institutional investment

India's real estate market remained a strong magnet for institutional investment in Q1 2026, with total capital inflows rising by 25% year-on-year (YoY) to USD 1.64 billion, according to Colliers India. 

This surge was primarily driven by domestic investors, who contributed USD 1.2 billion, a 57% YoY increase, and accounted for three-fourths of the total capital inflows for the quarter.

However, foreign fund inflows saw a significant decline, dropping by approximately 75% quarter-on-quarter to USD 400 million. 

Analysts attribute this sharp drop to global uncertainties, particularly the escalating Middle East conflict, which has prompted international investors to adopt a more cautious approach. 

Despite the dip in foreign capital, Badal Yagnik, CEO & Managing Director of Colliers India, emphasized that institutional investments in India’s real estate remain resilient, with strong domestic demand continuing to support the market across various asset classes. 

At the city level, Delhi-NCR led the way, attracting USD 400 million, representing over 25% of total quarterly investments, followed by Bangalore with USD 300 million. Together, these two cities accounted for 46% of Q1 2026 inflows, driven by large office transactions in operational assets. 

Investments across multiple cities amounted to close to USD 500 million, representing almost one-third of total quarterly inflows and predominantly focusing on hospitality and residential assets - which reflects growing investor interest in opportunities outside Tier 1 cities and across diverse asset classes.

The office segment remained the dominant investment sector in Q1 2026, attracting USD 820 million - almost half of total capital inflows and nearly double the amount seen in Q1 2025 - while residential investments followed with USD 320 million in inflows, marking a 7% YoY increase and accounting for 20% of total quarterly capital. 

Meanwhile, hospitality, alternative, and retail assets collectively recorded USD 350 million, comprising over 20% of total inflows. Foreign investors were a major contributor to these sectors, accounting for 70% of the capital. 

Vimal Nadar, National Director & Head of Research at Colliers India, highlighted the growing diversification of global capital, particularly into alternative assets driven by their superior risk-return profiles and strong long-term demand.

► Learn more about the impact of the Middle East conflict on Indian real estate from industry leaders.

India’s office leasing surges to 20.7 million square feet

India’s office market has started 2026 with record-breaking momentum, driven primarily by demand from Global Capability Centres (GCCs) and an expanding base of occupiers. 

According to the India Office Figures Q1 2026 report by CBRE South Asia, total office leasing reached approximately 20.7 million square feet (msf) in Q1 2026, marking the highest first-quarter absorption on record and a 5% year-on-year increase compared to Q1 2025.

GCCs played a pivotal role in this surge, accounting for 9.1 msf of leased office space, around 44% of total absorption in Q1 2026. 

While established Fortune 500 companies continue to drive nearly half of this demand, the ecosystem is increasingly being diversified by the rise of mid-market and "nano" GCCs focused on specialized domains such as FinTech and rapid AI prototyping. 

US-based firms remain the most active participants, contributing roughly 73% of GCC leasing, though growing interest from EMEA and APAC regions is further broadening the landscape.

Sector-wise, the demand profile remains well-diversified. Flexible space operators and technology firms together accounted for nearly 40% of the total absorption, while the Banking, Financial Services and Insurance (BFSI) sector also maintained steady traction. 

Domestic firms have shown particularly strong growth, with the report indicating their leasing activity rose by 22% year-on-year. 

Additionally, there is an accelerating "flight to quality" among occupiers; 79% of total leasing was concentrated in green-certified assets, reflecting a baseline expectation for sustainable, amenity-rich, and ESG-compliant workspaces.

Retail leasing declines due to limited supply

India’s retail real estate market recorded a total leasing volume of 1.95 msf across the top eight cities in Q1 2026, a 10% year‑on‑year (YoY) and 28% quarter‑on‑quarter (QoQ) moderation - driven largely by supply constraints due to the absence of significant new mall completions. 

According to a recent report by Cushman & Wakefield, the composition of leasing during the quarter highlighted strong preferences within the retail ecosystem: mall leasing accounted for 47% of total activity, up from 33% a year ago, pointing to a growing shift towards organised and experience‑driven formats. 

Meanwhile, main streets continued to anchor overall volumes with a 53% share, underlining the ongoing strength of high‑visibility, consumption‑led locations.

City‑level dynamics further emphasised concentration of demand. Delhi‑NCR led with 0.59 msf (30% of total leasing), followed by Hyderabad at 0.43 msf (22%) and Mumbai at 0.25 msf (13%), with these three markets collectively representing 65% of Q1 leasing activity. 

When it comes to categories, fashion and food & beverage retailers contributed 46% of total leasing, while entertainment accounted for 11%, largely within malls, underscoring the increasing role of experiential retail formats.

The tighter supply environment also translated into firming fundamentals. Grade A mall vacancy declined to 5.7% in Q1 2026, with Grade A+ assets even more constrained at 2.6%, reflecting strong occupier preference for quality destinations.

Prime high‑street rentals rose 1.4% QoQ and 4.5% YoY, driven by selective, location‑specific demand. 

Looking ahead, around 5.88 msf of new retail space is expected to be delivered in 2026, with a broader pipeline of 14.94 msf through 2028, which is anticipated to ease supply constraints and support more consistent leasing activity.
 

---

Look out for a new edition of the Market Radar next week!