Private equity investments in Indian real estate fell 29% year-on-year in 2025, even as office assets continued to attract the largest share of capital, according to a report by Knight Frank India. The report indicates that while 2025 marked a pause in private equity activity, investment momentum is expected to improve in 2026 as the cost of capital stabilises and valuation expectations begin to align. Private equity inflows into Indian real estate are projected to rise to around $4.4 billion next year, driven by selective deployment rather than broad-based risk taking.
The findings are part of Trends in Private Equity Investments in India: H2 2025, which tracks only private equity capital deployed across office, residential, retail and warehousing assets. The report excludes REITs, InvITs, hospitality and data centres to ensure consistency in investment tracking.
Knight Frank India said the decline was driven by a recalibration across three interlinked factors: the effective cost of capital, exit visibility and valuation alignment. While macro indicators such as GDP growth, inflation and interest rates showed improvement, these factors did not realign quickly enough to support sustained capital deployment during the year.
2026 outlook: cautious pickup, not a rush back
Despite the slowdown in 2025, Knight Frank India said its investment forecasting model points to a measured recovery next year.
“Knight Frank’s investment forecasting model points to a more supportive environment over the medium term. Based on assumptions around government capital expenditure, currency movement, inflation, interest rates and incremental office supply, private equity investments in Indian real estate are projected to rise by 28% year on year to approximately $4.4 billion in 2026. This recovery is expected to be measured, driven by selective growth rather than a broad-based return of risk capital,” said Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India. The report added that slower valuation adjustment between buyers and sellers constrained deal execution, even as operating performance in office and retail assets remained stable. As a result, private equity investors stayed cautious and tilted towards downside-protected, income-focused structures instead of large equity-led transactions.
The consultancy noted that capital deployment in 2026 is likely to be guided by asset-level fundamentals and execution clarity, rather than a rapid return of risk-heavy bets.
Office assets lead PE inflows despite 2025 slowdown
According to the report, total private equity inflows into Indian real estate stood at around USD 3.5 billion in 2025, sharply lower than the previous year. Office assets remained the largest recipient, accounting for 58% of total investments, with inflows of about USD 2.0 billion.
Knight Frank India said office investment volumes were broadly in line with the three-year average, indicating continued investor interest in income-generating assets. The segment benefited from its scale, institutional ownership profile and steady leasing demand, even as investors remained cautious on pricing and exits.
Residential capital turns structured
Residential real estate ranked second, drawing 17% of total private equity investments during the year. However, the nature of capital deployment changed.
The report said investors increasingly preferred structured and credit-led instruments, focusing on projects with clear execution visibility and contracted cash flows. Equity investments were largely limited to de-risked developments.
Warehousing and retail see selective bets
Warehousing emerged as the third-largest segment, attracting 15% of private equity inflows in 2025. Knight Frank India said occupier demand remained healthy, supported by e-commerce expansion, manufacturing growth and supply-chain formalisation. Investment volumes, however, were constrained by limited availability of stabilised assets and tighter underwriting standards.
Retail accounted for 11% of total private equity investments, driven mainly by a single large transaction after nearly two years of muted activity. The report said capital was deployed only in assets meeting strict criteria on scale, operating performance and exit visibility.
Knight Frank India added that office and logistics assets are expected to continue attracting most private equity capital in 2026, while residential and retail investments are likely to remain project-specific and structured in nature.
Taken together, Knight Frank India’s findings suggest that the slowdown in private equity investments during 2025 was less about weakening real estate fundamentals and more about capital market constraints. With offices and logistics continuing to offer income visibility and execution clarity, and with valuation and exit conditions expected to improve gradually, the consultancy expects private equity activity to pick up in 2026—though investors are likely to remain disciplined and selective rather than aggressive in their return.