Office Real Estate Dominates 2025 PE Inflows in India Despite Market Slowdown

Office real estate attracted more than USD 2 billion in PE investments during the year, accounting for 58 per cent of total inflows, even as overall real estate investments stood at USD 3.5 billion.

In its latest report, 'Trends in Private Equity Investments in India: H2 2025,' Knight Frank India noted that office investment volumes remained broadly in line with the three-year average, underscoring continued investor conviction, despite a broader global reassessment of risk, returns and execution

Mumbai-based Knight Frank India said private equity investors remained cautious in 2025 as the market underwent a "sharp recalibration across three interconnected dimensions - the effective cost of capital, exit visibility, and valuation alignment."

While macroeconomic conditions such as GDP growth, interest rates and inflation improved, these factors "failed to realign quickly enough to support sustained capital deployment," the report said.

Residential real estate emerged as the second-largest recipient of PE investments, accounting for 17 per cent of total inflows.

However, Knight Frank observed a shift in the nature of capital deployment, with investors increasingly favouring "credit-led instruments over pure equity exposure."

Warehousing was the third-largest segment, drawing 15 per cent of PE investments in 2025, supported by robust occupier demand driven by e-commerce expansion, supply-chain formalisation and manufacturing growth.

In contrast, retail real estate saw limited activity, accounting for just 11 per cent of investments, with capital deployed only into assets meeting "strict criteria on scale, operating performance, and exit visibility"

Commenting on the outlook, Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India, said, "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 per cent year on year to approximately USD 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."

- ANI