Market Radar India: Real estate investment activity shifts towards smaller deals

Real estate deal value drops 63% in Q1 2026

India’s real estate sector begins 2026 with a more measured investment profile, as transaction dynamics shift towards smaller and mid-sized deals despite an increase in overall activity.

According to a report by Grant Thornton Bharat, during the January to March quarter of 2026, total deal value declined 63% quarter-on-quarter to USD 763 million across 32 transactions. 

The contraction was largely attributed to the absence of large-ticket transactions, even as deal volumes increased from 26 in Q4 2025 and from 28 deals recorded in the same period a year earlier, reflecting a 14% annual rise in activity.

In a more cautious and selective investment environment, stakeholders appear to be prioritising smaller and mid-sized opportunities, reflecting heightened sensitivity to ongoing global macroeconomic and geopolitical uncertainties.

Mergers and acquisitions accounted for 19 deals valued at USD 305 million during the quarter, while private equity and venture capital activity reached 13 transactions with a combined value of USD 458 million, marking the highest quarterly volume in the past year. 

Commercial development continued to dominate investor preference, accounting for 42% of M&A volumes and 78% of private equity investment value, reflecting the relative stability of rental yields and income visibility associated with office assets.

At the same time, residential development recorded renewed investor attention. The number of deals increased from a single transaction in the previous quarter to six deals during Q1 2026, with a combined value of approximately USD 178 million. 

“The quarter saw a clear shift towards mid-sized and income-generating assets, with domestic activity continuing to dominate and private equity remaining a key source of capital,” explained Shabala Shinde, Partner and Real Estate Industry Leader at Grant Thornton Bharat. 

India drives APAC prime office momentum

Asia-Pacific’s prime office markets demonstrate sustained resilience in early 2026, supported by steady occupier demand and continued expansion from global enterprises seeking high-quality workspace across the region.

According to Knight Frank, prime office rents across APAC increased 0.8% quarter on quarter in Q1 2026, despite renewed geopolitical volatility. The firm’s latest Office Highlights report indicates that 18 of the 24 monitored cities recorded stable or rising rents, up from 17 in the previous quarter. 

India and Australia emerged as key contributors to regional growth momentum. Bangalore stood out as the region’s top-performing market, recording a 14% year-on-year increase in rents, driven largely by strong demand from global capability centres (GCCs), which accounted for 41% of leasing activity in the city. 

India’s office market, in particular, continues to reflect strong underlying fundamentals. According to JLL India, both gross and net office leasing increased during the January to March period, rising by 10% and 7% respectively across the country’s major cities. 

"India's office market has delivered its strongest-ever first quarter, demonstrating remarkable resilience despite global headwinds. This growth is being driven by a fundamental transformation in how global enterprises leverage the country," said Rahul Arora, Head of Office Leasing & Retail Services at JLL India.

Gross leasing volumes reached 21.5 million square feet, compared with 19.5 million square feet in the same period last year, while net absorption increased to 13.7 million square feet from 12.8 million in Q1 2025.

Leasing activity from foreign firms establishing GCCs recorded particularly strong growth, increasing 43% year on year to 9.8 million square feet and accounting for 45.5% of total leasing activity. 

Domestic occupiers also played an important role in sustaining market activity. Indian firms accounted for 9.2 million square feet of gross leasing during the quarter, representing a 5% increase compared with the previous year. 

Within this segment, flexible workspace operators emerged as a major driver of demand, capturing 57.8% of total space leased by domestic firms and reflecting the continued evolution of workplace strategies toward more adaptable and scalable formats.

Industrial and warehousing demand rises 22%

India’s industrial and warehousing sector continues to demonstrate strong underlying demand in early 2026, supported by logistics expansion, supply chain modernisation and sustained activity across key occupier segments.

According to JLL India, leasing activity across Grade-A industrial and warehousing assets in the country’s top eight cities reached approximately 11 million square feet in Q1 2026, marking a 22% year-on-year increase. 

Delhi-NCR remained the leading demand centre, accounting for 28% of total leasing activity, followed by Chennai with a 21% share. Hyderabad and Bangalore also recorded notable growth, with leasing volumes expanding two to three times compared with the same period last year.

Third-party logistics providers remained the dominant occupier group, accounting for roughly one-third of total Grade-A leasing demand, equivalent to approximately 3.5 million square feet. 

Demand from this segment increased by 1.8 times compared with Q1 2025, driven by network expansion, increased outsourcing of logistics operations and continued improvements in multi-modal connectivity. 

E-commerce and automobile companies also played a significant role in sustaining momentum during the quarter, together accounting for approximately 32% of total leasing volumes. Both sectors recorded more than 1.5 million square feet of space uptake, reflecting continued consumer demand growth and manufacturing activity. 

Meanwhile, diversification across occupier categories remained evident, with fast-moving consumer goods (FMCG) and electronics firms more than doubling their leasing activity on an annual basis.

On the supply side, new completions continued to accelerate, contributing to a rise in vacancy levels. The top eight cities recorded approximately 12.5 million square feet of new supply during Q1 2026, representing a 33% year-on-year increase. 

As supply outpaced demand during recent quarters, overall vacancy levels increased to 16.7% by the end of Q1 2026. Despite this upward movement in vacancy, rental levels remained largely stable across most major markets, with select high-activity micro-markets recording notable annual rental growth.
 

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