In search of predictable returns, pvt equity funds step up office asset play in Q1

Mumbai: Office properties continued to anchor institutional investment in India's real estate sector in the first quarter of 2026, driving private equity inflows even as overall deployment remained selective.

The concentration of capital in office assets reflects investor preference for stabilised, income-generating properties with predictable cash flows.

Private equity investments in real estate stood at $637 million across nine transactions during the quarter, a 2.1-fold increase from $300 million a year earlier, according to Knight Frank India.

Office assets led activity, accounting for $529 million, or 83% of total investments, across four deals. Three were equity investments, indicating improving confidence in pricing and leasing fundamentals in key markets.

"The opening quarter of 2026 confirms a direction if not yet a velocity," said Shishir Baijal, international partner, CMD, Knight Frank India. "The doubling of PE investment volumes relative to Q1 2025, combined with a decisive tilt toward ready office assets and structured residential credit, suggests that investors are increasingly comfortable with the risk-return profile in select segments."

The broader recovery in 2026 will depend on faster valuation alignment in the development pipeline and a supportive macro environment, he added.

"The dominance of office investments this quarter highlights a clear institutional preference for predictable cash flows and stabilised income-generating assets," said Anand Lakhotia, MD & co-head of real estate fund at Motilal Oswal Alternates. "In a selective deployment environment, leased and near-stabilised office properties offer better visibility on yields and lower execution risk. We are also looking at select greenfield commercial opportunities where strong sponsors, proven micro-markets and leasing potential can create meaningful value over the medium term."

All office deals during the quarter involved leased or near-stabilised assets, underscoring a focus on yield visibility and asset-level security over development exposure.

Residential investments totalled $108 million across five transactions, contributing 17% of overall activity. Most were debt-led, with four deals structured as credit, reflecting a preference for downside protection amid uncertain exit timelines.