Global Real Estate News

Mumbai | ReNews International Correspondent Private equity investment in India's real estate sector declined by 31% year-on-year to $1.66 billion during the first nine months of 2026, even as the number of investment transactions increased, indicating a shift towards smaller deals and more selective capital deployment. According to Knight Frank India's Capital Market Report released on October 28, total private equity investment between January and September 2026 stood at $1.66 billion, compared with $2.41 billion during the corresponding period of 2025. Despite the decline in investment value, the number of transactions increased from 24 to 31, representing growth of approximately 29%. However, the average disclosed deal size fell by 47% to $53 million, reflecting a reduction in large investment transactions that had previously supported higher capital inflows. Knight Frank reported that private equity investment during the first nine months of 2026 reached its lowest level in six years on a comparable January-September basis. One of the most significant developments was the growing dominance of domestic investors in India's property market. Indian investors accounted for 85% of total private equity investment during the period, compared with 25% a year earlier. Domestic investment increased from $603 million to $1.42 billion, while foreign investors contributed approximately $240 million. Consequently, the share of foreign investment declined from 75% in the first nine months of 2025 to just 15% during the corresponding period of 2026. The office property sector continued to attract the largest share of investment. Office assets received $1.18 billion, accounting for approximately 71% of total private equity capital, although investment in the segment declined by 19% year-on-year. Completed office properties accounted for 78% of investment in the sector, highlighting growing investor preference for income-generating assets with lower development risks. Equity financing represented 88% of total office investment. The residential property sector attracted $320 million through 19 transactions, representing a 33% year-on-year decline. Debt and structured credit accounted for approximately 97% of residential investment, while 83% of the capital was directed towards projects under construction. India's National Capital Region (NCR) received approximately 63% of residential investment during the period. Warehousing and logistics properties attracted $160 million through a single transaction during the third quarter. In contrast, the retail property segment recorded no private equity investment during the first nine months of 2026, compared with approximately $374 million in the corresponding period last year. Among major cities, the National Capital Region led investment activity with $568 million, followed by Pune at $356 million and Chennai at $319 million. Mumbai attracted approximately $276 million, while Bengaluru received $137 million. Shishir Baijal, Chairman and Managing Director of Knight Frank India, said the changing composition of real estate investment was as significant as the overall decline in capital inflows. He explained that domestic investors were playing a substantially larger role, while investment decisions increasingly depended on expected returns, project structures and associated risks. According to Baijal, completed office assets and structured financing for residential development reflected different approaches towards balancing investment returns and risks. He emphasised that India's ability to attract international capital would depend on the quality of investment opportunities, transparency and confidence in the country's long-term economic fundamentals.