Capital gravitates towards income-generating assets as realty deals turn selective

Mumbai: Institutional investors in India's real estate sector continued to favour income-generating commercial assets and residential development platforms in the September quarter, even as the absence of large-ticket transactions and subdued capital-market activity weighed on overall deal values.

The sector recorded 24 transactions worth $705 million in the third quarter of 2026, compared with 42 deals worth $2.9 billion a year ago, showed Grant Thornton Bharat data. Deal volumes fell 43% on-year, while value declined 76%. On a sequential basis, volumes fell 38% and values declined 69% from $2.3 billion in the previous quarter.

“The quarter reflects a market that remains active but increasingly selective. Investors are prioritising assets that offer visibility of cash flows, execution certainty and resilience through cycles rather than pursuing scale for its own sake. The continued preference for commercial assets and established residential platforms suggests capital is gravitating towards segments where underlying demand remains strong,” said Bhavik Vora, partner, real estate, Grant Thornton Bharat.


Excluding public listings and Qualified Institutional Placements (QIPs), mergers and acquisitions (M&A) and private equity (PE) activity comprised 22 transactions worth $647 million. In comparison, these segments recorded 33 deals worth $1.7 billion in Q3 2025, reflecting a 33% decline in volumes and a 62% fall in value.

“Investors are increasingly focused on the quality of cash flows, asset performance and the visibility of returns. This is driving a more disciplined approach to capital deployment, with a preference for assets backed by established demand and a clear path to value creation. The emphasis is shifting towards execution certainty and sustainable returns rather than growth at any cost,” said Chintan Sheth, CMD, Sheth Realty.

As larger transactions take longer to close, he expects deal activity to remain focused on high-quality assets with clear value creation potential.

Private equity remained the largest contributor to deal value, accounting for nearly 79% of the total, despite a sharp quarter-on-quarter slowdown. The segment recorded nine transactions worth $555 million, down from 12 deals worth $859 million in Q3 2025, pointing to a more cautious investment environment with capital concentrated in fewer, larger transactions.

Brookfield India Real Estate Trust's acquisition of a Grade-A office asset in Mumbai's Bandra-Kurla Complex for $179 million was the quarter's largest investment. Nexus Select Trust's $168 million investment in a retail and hospitality asset in Guwahati was the second-largest. Four transactions above $50 million accounted for 91% of total private equity value.

Commercial development recorded five deals worth $371 million, accounting for 57% of sector deal value. Residential development attracted four PE investments worth $183 million, compared with just one residential development deal a year ago.

M&A activity comprised 13 transactions worth $92 million, against 21 deals worth $843 million a year earlier. Aurum PropTech's acquisition of Locon Solutions, which operates Housing.com, for around $48 million accounted for more than half of M&A value. All M&A transactions during the September quarter were domestic.

Public-market fundraising also weakened as two IPOs raised $59 million during the quarter, compared with five IPOs worth $805 million and four QIPs worth $344 million a year ago.