Private equity (PE) investments in India’s real estate sector declined sharply by 29 per cent in 2025 to USD 3.46 billion, primarily due to a significant slowdown in funding for housing and warehousing projects, according to a report by real estate consultancy Knight Frank India.

The PE inflow was USD 4.9 billion in 2024, while the sector had witnessed a record-high investment of USD 6.73 billion in the 2018 calendar year. Knight Frank noted that investor sentiment remained cautious throughout 2025, despite improvements in macroeconomic indicators such as GDP growth, easing interest rates and moderating inflation.

Among asset classes, office real estate emerged as the strongest performer. PE investments in office assets increased to USD 2 billion in 2025 from USD 1.85 billion in the previous year, accounting for 58 per cent of the total inflows during the year. Retail real estate also saw a revival, attracting USD 374 million in investments, compared to no inflows in 2024.

In contrast, the housing segment witnessed a sharp decline, with PE investments falling to USD 576 million in 2025 from USD 1,177 million a year earlier. Warehousing assets were hit even harder, as inflows plunged to USD 510 million from USD 1,877 million in 2024.

Knight Frank attributed the overall decline to a recalibration by investors across three key factors — the effective cost of capital, exit visibility and valuation alignment. The consultancy said that although macroeconomic conditions improved, these variables did not adjust quickly enough to encourage sustained capital deployment.

Looking ahead, Knight Frank Chairman and Managing Director Shishir Baijal said PE investments in real estate could rebound by 28 per cent in 2026 to around USD 4.4 billion, driven by selective opportunities rather than broad-based risk-taking. The analysis excludes REITs, InvITs, hospitality and data centre transactions.