Market Radar India: Real estate sector sees 59% rise in private equity inflows

Private equity inflows hit USD 6.7 billion in 2025

The Indian real estate sector experienced a remarkable resurgence in 2025, with private equity inflows rising by 59% year-on-year to a total of USD 6.7 billion - primarily driven by India's strong macroeconomic performance, highlighted by a 8.2% GDP expansion in the second quarter of the fiscal year.

The investment climate was further supported by easing inflationary pressures and a cumulative 125 basis point reduction in repo rates, which enhanced liquidity and bolstered investor sentiment.

A defining feature of this investment boom was the overwhelming dominance of foreign capital, which accounted for approximately 76% of total inflows - or USD 5.1 billion - and  underscores sustained global confidence in the country’s property market.

Strategic land acquisitions also played a significant role, with over 60% of these investments earmarked specifically for the development of office spaces and data centres. Mumbai and Pune emerged as the primary hubs, attracting 79% of this targeted capital.

Sector-wise, the office segment retained its position as the leading asset class, drawing USD 2.4 billion in investments and accounting for more than 35% of total activity. This was closely followed by the rapidly expanding data centre and residential sectors, contributing 23.2% and 21%, respectively.

The capital distribution also reflected a balanced approach to project lifecycles, with both ready-to-move assets and under-construction developments securing around 23% of total inflows - which suggests that investors are equally interested in immediate income-generating properties as well as long-term development opportunities.

Experts from Savills India suggest that this preference for core, scalable assets is expected to persist into 2026, with the market anticipated to maintain its momentum across key commercial and digital infrastructure segments.

Housing sector faces mixed performance in Q1 2026

In the first quarter of 2026, India’s residential real estate sector showed mixed performance, revealing both resilience and emerging challenges.

According to research by Anarock, housing sales across the top seven cities declined by approximately 7% quarter-on-quarter, primarily due to geopolitical uncertainty and a slowdown in foreign investments, particularly from the Middle East and West Asia.

Besides this drop in sales, a notable trend so far this year was the modest 2% quarterly growth in new launches, rising from 123,835 units in Q4 2025 to 126,265 units in Q1 2026. The year-on-year rise was even more significant, showing a 26% increase compared to Q1 2025.

However, sales volumes failed to keep pace, reversing the post-pandemic trend where demand typically outstripped new supply. 

As a result, unsold inventory grew by 4% quarter-on-quarter and 7% year-on-year, with total stock across the top seven cities surpassing 600,000 units - which indicates a more cautious buyer sentiment, with slower absorption of new supply.

Despite a rise in unsold inventory, residential property prices showed resilience with annual growth across most cities, with the National Capital Region seeing price increases ranging from 4% to 15%, driven by luxury housing demand.

Still, cost pressures continue to shape the sector’s operating environment. JLL India forecasts a 3% to 5% rise in construction costs in 2026, driven by higher input prices, including labour and materials, with further increases expected from energy and logistics costs.

Global macroeconomic instability has further driven up fuel and raw material prices, potentially exerting additional pressure on construction costs and disrupting supply chains, particularly for materials such as cement, steel, and energy-related inputs.

While the underlying demand fundamentals are supported by long-term housing needs and economic growth, near-term headwinds are prompting a more cautious stance among buyers and investors, particularly in segments sensitive to cost fluctuations and shifts in sentiment.

Blackstone diversifies its India strategy 

Amid geopolitical uncertainty and a slowdown in foreign investments, Blackstone is diversifying its portfolio in India to maintain its competitive edge. 

The firm is moving beyond traditional office spaces and venturing into new sectors such as neighbourhood clinics, student dormitories, data centres, and renewable energy.

India has now become Blackstone’s largest real estate investment outside the US and UK, with its USD 50 billion portfolio in the country split evenly between real estate and private equity.

The firm’s approach has centred on taking calculated risks, investing in emerging sectors such as warehouses and retail malls in the past, alongside successful investments in logistics hubs, aligned with India’s burgeoning e-commerce demand.

Looking ahead to the next decade, CEO Stephen Schwarzman has set an ambitious target of reaching USD 100 billion in total investments across all sectors in India.

To achieve this, Blackstone is diversifying further into cutting-edge digital infrastructure, recently leading a USD 600 million funding round for AI infrastructure start-up Neysa, as well expanding rapidly into data centres and renewables, while exploring opportunities in private credit.

While office yields in India remain attractive compared to major global cities such as New York and Singapore, the firm is also venturing back into the residential sector, albeit with a more cautious approach - it took a stake in Pune-based Kolte-Patil Developers Ltd., signaling a return to housing projects but without assuming full construction risk.

By managing properties directly with thousands of employees, Blackstone aims to mitigate regulatory risks and remain invested despite the “legal noise” that often characterises the Indian property market.
 

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