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Private equity (PE) investments in India's real estate sector declined 23% year-on-year to USD 1.13 billion during the first half of 2026, according to Knight Frank India. The moderation in capital inflows comes amid elevated global interest rates, tighter financial conditions and heightened geopolitical uncertainty, prompting investors to adopt a more selective approach to capital deployment. Office assets continued to dominate investment activity, attracting 89% of total inflows, while residential investments fell sharply as investors preferred lower-risk opportunities. Although warehousing and retail did not record significant PE transactions during the period, Knight Frank said the absence of deals should not be interpreted as weakening fundamentals. The report indicates that investment decisions are increasingly being driven by execution certainty, liquidity and realised returns rather than growth prospects alone.
Private equity (PE) investments in India's real estate sector declined 23% year-on-year to USD 1.13 billion during the January-June period of 2026, compared with USD 1.47 billion in the corresponding period last year, according to Knight Frank India. The consultancy attributed the moderation in investment activity to global economic conditions, including higher borrowing costs, tighter financial markets and increased geopolitical uncertainty, which have made institutional investors more selective in allocating capital.
Despite the overall decline, office real estate remained the preferred investment destination, accounting for 89% of total PE inflows during the first half of the year. Investments into office assets rose 33% year-on-year to USD 998 million from USD 579 million in the same period last year. Knight Frank attributed the resilience of the office segment to sustained leasing demand from Global Capability Centres (GCCs), multinational companies and domestic occupiers, alongside investor preference for completed income-generating assets over development-led projects. Around three-quarters of office investments during the period were directed towards ready assets, reflecting a stronger focus on stable rental income and lower execution risk.
The residential sector recorded a sharper slowdown, with PE investments falling to USD 128 million during January-June from USD 297 million a year earlier. According to the report, investors adopted a more cautious approach towards development-led residential opportunities amid higher financing costs and stricter return expectations. Debt financing also accounted for a larger share of residential investments as investors sought greater downside protection while continuing to participate in the housing market.
Shishir Baijal, International Partner, Chairman and Managing Director of Knight Frank India, said the moderation in investment activity reflected changes in the global capital environment rather than any weakening of India's real estate fundamentals. He noted that rising global borrowing costs had reduced the yield advantage traditionally offered by emerging markets, resulting in investment decisions being increasingly influenced by factors such as execution certainty, taxation, liquidity and realised returns.
The report also noted that neither the warehousing nor retail segments recorded significant private equity transactions during the first six months of 2026. However, Knight Frank said the absence of deals should not be viewed as a decline in the attractiveness of these asset classes, but rather as a reflection of cautious capital deployment amid prevailing macroeconomic conditions.
Regionally, the National Capital Region (NCR) emerged as the largest recipient of PE capital during the period, recording a 522% year-on-year increase in inflows to USD 411 million. Pune followed with USD 356 million, while Chennai attracted USD 155 million, Bengaluru received USD 116 million, Mumbai USD 84 million and Hyderabad USD 4 million, highlighting the continued concentration of institutional investment in established commercial markets despite the broader slowdown in capital inflows.
Source - PTI
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