Key Points

AIFs are privately pooled funds that invest in non-traditional assets like private equity, hedge funds, and real estate, offering niche, high-risk, high-reward opportunities suited for experienced investors.

According to Anarock Research, the real estate sector accounted for the largest share (15 per cent) of cumulative net AIF investments, with Rs 73,903 crore invested in real estate out of an all-sectors total of Rs 5,06,196 crore in the April-December period of FY25.

Other sectors benefiting from AIF investments include IT/ITeS, Financial Services, NBFCs, Banks, Pharma, FMCG, Retail, Renewable Energy, and others.

"By the end of 9M FY25, AIF investments in real estate rose from Rs 68,540 crore by FY 2024-end to Rs 73,903 crore -- an appreciable 8 per cent growth in first three quarters of fiscal year 2025. This pace is expected to sustain and pick up," said the report.

The number of AIF active in the market has grown 36-fold over the past decade - from 42 by March 31, 2013 to 1,524 AIFs as of March 5, 2025, with commitment raised increasing five-fold since 2019.

Between FY13 and FY25, the commitment raised in AIFs has seen an impressive 83.4 per cent compounded annual growth rate (CAGR).

"Amid increasing constraints on traditional funding sources, AIFs are an agile and innovative financing mechanism to address capital gaps at various stages of real estate development. Since they pool capital from domestic and foreign investors, AIFs are a sustainable and scalable funding ecosystem," said Prashant Thakur, Regional Director and Head-Research, Anarock Group.

Going forward, the adoption of blended finance models, AI-driven risk assessments, and streamlined regulatory frameworks maximise the impact of AIFs further, he added.

This surge in commitments is mainly fuelled by Category II AIF, which is contributing almost 80 per cent over the last five fiscal years.

Domestic investors continue to hold the majority share in AIF fundraising activities; however, Category II AIFs exhibit a notable balance with foreign portfolio investors (FPIs) having an almost equal participation, the report mentioned.

- IANS