Market Radar India: Real estate capital inflows surge 88% to USD 30.7 billion

Real estate inflows total USD 30.7 billion from 2024 to Q126

India’s real estate sector is undergoing a structural transition towards a more institutionalised credit environment, as highlighted in CBRE’s report “Deploying Capital in a Transformative Era: The Four-Quadrant Analysis”.

This shift is underpinned by strong macroeconomic fundamentals, including GDP growth of 7.6% in FY2026, record GST collections exceeding INR 2 trillion, and resilient domestic demand despite ongoing geopolitical uncertainty. 

Institutional confidence remains notably strong, reflected in a record equity investment volume of USD 14.3 billion in 2025, followed by a further USD 5.1 billion in Q1 2026.

This momentum is reinforced by the continued maturation of public markets, with REIT-led capital reaching USD 3.8 billion between 2024 and Q1 2026, representing a 66% increase compared to 2022-23 levels. 

Over the same period, the market capitalisation of India-listed REITs expanded nearly six-fold to INR 1.7 trillion compared to FY2020, providing a more transparent and liquid exit route for stabilised assets.

At the same time, the sector continues to benefit from robust debt financing channels, attracting over USD 146 billion between 2024 and Q1 2026, as banks and non-banking financial institutions support growth under evolving regulatory frameworks. 

Capital deployment remains concentrated in gateway cities such as Mumbai, Delhi-NCR, and Bangalore, while gradually extending into emerging hubs alongside increasing diversification into alternative asset classes including data centres, hospitality, and healthcare.

Looking ahead, the outlook remains positive, with 74% of investors indicating an intention to increase allocations, supported by regulatory developments, new financial instruments, and a growing focus on opportunistic strategies. 

Hotel demand in India drives 65% occupancy levels

The Indian hospitality sector is navigating sustained structural momentum, transitioning from post-pandemic recovery into continued expansion - as evidenced by an estimated 4.5 billion domestic tourist visits in 2025, according to a new report by HVS ANAROCK and Gleeds.

The segment closed last year with nationwide occupancy levels ranging between 63% and 65%, while average room rates increased to between INR 8,500 and INR 8,700, representing year-on-year growth of up to 10%. 

This pricing momentum supports RevPAR in the range of INR 5,400 to INR 5,600, marking an increase of 10% to 12% compared to the previous year. Development activity mirrors these trends, with brand signings reaching an all-time high of approximately 64,118 keys across 586 properties in 2025, a 36% increase in keys year on year.

The geographic focus of expansion is shifting beyond traditional metropolitan centres towards Tier 2, Tier 3, and increasingly Tier 4 markets, supported by decentralising economic activity, improving connectivity, and rising local aspirations. 

From a segmentation perspective, the midscale category remains the most prominent opportunity, accounting for 55% of total signings, offering an optimal balance between development costs and strong domestic demand. 

At the same time, soft brands and conversions are gaining traction, representing 10% of total signings, allowing independent hotels to access global distribution platforms and loyalty programmes while retaining brand identity.

However, development dynamics are becoming more complex. According to the 2025 Hotel Development Cost Report, construction costs per key increased by 8% to 12% in 2025, driven by input cost inflation, skilled labour shortages, and supply chain constraints. 

Excluding land and statutory approvals, average development costs now range between INR 9,000 and INR 14,000 per square foot of built-up area. On a per key basis, costs average approximately INR 4.77 million for economy hotels, INR 5.56 million for midscale, INR 14.75 million for upscale, and INR 28.73 million for luxury assets.

In response, developers are increasingly adopting modern construction methodologies, including prefabrication and modular systems, which can reduce construction timelines by 30% to 50%, enabling earlier project completion and faster revenue stabilisation.

Overall, the sector enters 2026 from a position of strength, with brand signings projected to reach 690 hotels and 76,000 keys. Technology adoption is also expected to accelerate, particularly in artificial intelligence, as 83% of Indian travellers indicate that AI enhances travel planning through greater personalisation and efficiency.

While risks from the Middle East conflict and rising aviation costs persist, the sector’s diverse demand base - including religious tourism for events such as the Maha Kumbh, destination weddings, and large-scale entertainment events - is expected to provide sustained long-term demand visibility.

Luxury housing strengthens across southern India

The luxury residential market is demonstrating sustained depth and resilience, with high-value transactions continuing to gain traction across Hyderabad, Bangalore, and Chennai.

According to recent data from India Sotheby’s International Realty and CRE Matrix, the region records 811 ultra-luxury residential sales - defined as properties priced at INR 100 million or above - during the 2025-26 financial year, representing a combined transaction value of INR 112.46 billion.

Hyderabad emerges as the leading market within this segment, accounting for 625 units sold with a total value of INR 85.62 billion, driven by strong end-user demand, rising entrepreneurial wealth, and continued expansion across the technology and financial services sectors. 

The city’s western corridor, in particular, continues to attract high-value residential development, supported by proximity to key employment hubs, improving infrastructure, and the availability of large-format housing options.

Bangalore follows with 128 luxury units sold, totalling INR 19.57 billion, reflecting strong absorption and reinforcing its position as a mature high-income residential market, while Chennai remains anchored in its legacy prestige, recording 58 ultra-luxury transactions valued at INR 7.27 billion.

The profile of luxury homebuyers is also evolving, with demand increasingly led by end-users rather than speculative investors, and buyers prioritising larger living spaces, premium amenities, branded developments, and integrated community environments. 

This shift reflects a broader change in consumption patterns, where residential assets are viewed not only as stores of value, but also as lifestyle investments aligned with long-term occupancy.

Pricing dynamics remain firm across these markets, supported by constrained supply in prime micro-locations and rising input costs. 

Developers are responding with more curated, lower-density projects that emphasise exclusivity, design quality, and service integration, while transaction sizes continue to increase, reflecting both capital appreciation and a growing willingness among buyers to allocate greater capital to high-quality residential assets.

The outlook for the luxury segment remains constructive, with continued wealth creation, stable macroeconomic conditions, and sustained infrastructure investment expected to support demand - particularly in cities with strong employment fundamentals and global connectivity.
 

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