India's realty market holds ground with local money

Bengaluru: Institutional investment in India’s real estate market remains resilient, with strong domestic demand driving nearly three-fourths of the $1.6 billion inflows in the March quarter, well above the typical 20–50% share seen in the past 4–5 years, according to a report.

Both domestic and global institutional firms including HDFC, Kotak, EAAA, Nuvama, Nisus, Rava-Alta, Brookfield, and Blackstone, apart from builders like TRIL, Sattva, and Aurobindo Realty are expected to continue deploying capital selectively through large deals. This reinforces long-term confidence in the sector despite ongoing geopolitical tensions, including the Iran conflict.

According to Colliers India, inflows rose 25% year-on-year to $1.6 billion last quarter, about 64% higher than average Q1 volumes since 2020. Domestic capital surged 57% on-year to $1.2 billion during the quarter. However, foreign inflows moderated to $400 million in Q1 2026, a 23% decline.

Office assets led the charge at $800 million, nearly doubling from the year earlier, with domestic investors contributing more than 90%.

The residential segment followed with $300 million, while hospitality, alternatives, and retail collectively drew $350 million, with foreign capital comprising 70% of the combined figure.

“Institutional investments in India’s real estate market continue to remain resilient, supported by strong domestic demand across asset classes,” said Badal Yagnik, chief executive and managing director at Colliers India. “India’s favourable demographics, consumption-driven economy, and investor appetite to expand into both core and alternative assets are likely to keep its unique positioning in the wider APAC region intact. While global investors are likely to remain cautious in the near term, this phase is expected to be transient in nature.”

Middle Eastern sovereign wealth funds remain among India’s most consequential long-term institutional backers. According to Global SWF, which tracks sovereign investments, global SWFs invested $180.3 billion across 324 transactions in 2025, a 35% increase. The Gulf’s biggest funds PIF, Mubadala, ADIA, ADQ, ICD, KIA, and QIA accounted for 43% of the total, up 43%.

Experts said about 40% of spending by Gulf SWFs was earmarked for real estate and infrastructure, with India, along with China cited as an increasingly preferred destination.

Chanakya Chakravarti, an independent real assets advisor said the current business disruption is a cyclical pause within a fundamentally sound investment thesis. “India remains one of the very few economies globally offering sustained GDP growth and structural resilience that continues to attract long-term investor interest. The story here has durability of at least three decades,” he said.

Canada’s pension giants have also built deep India roots. CPP Investments’ India portfolio crossed $21.6 billion in net assets as of March 2025, though some Canadian funds have recently moderated their broader emerging market allocations amid global uncertainty. Singapore’s GIC and Japan-linked capital have similarly maintained significant exposure to Indian office and logistics assets.

Experts said although sovereign and pension fund flows may moderate over the next 4–6 months, established fund managers are well positioned with significant dry powder. Domestic investors maintain strong balance sheets and remain committed to large deals.

“India is one of the few markets in the world that sits at the intersection of consumption, innovation, quality, cost advantage, and scale,” said Shantanu Chakraborty, MD, commercial real estate, EAAA Alternatives. “Also, Indian commercial real estate today provides options at par with any developed market in terms of quality, with a significant pricing advantage. All asset classes of commercial real estate will gain from this.”

Colliers highlighted that diversification of inflows has further strengthened, with asset classes such as hospitality, alternatives, and retail witnessing a surge, collectively accounting for over 20% of March quarter volumes.

Looking ahead, private markets are expected to navigate a selective but active period. Global fund managers and several managing India-linked portfolios are anticipated to return to more active deployment within the next 4–6 months if conditions stabilise. Domestic capital will meanwhile remain the primary engine of inflows.