PE in Indian Realty Continues to Soften Amid Sectoral Shifts, Global Headwinds

Mumbai, April 7, 2025: The Indian real estate sector continues to navigate a rapidly evolving investment landscape, with private equity (PE) investments continuing to soften in FY25. The newly released ANAROCK Capital FLUX FY25 Annual Edition provides a detailed retrospective on PE investments in Indian real estate, revealing a nuanced picture of shifting investor preferences in the evolving real estate space in the backdrop of global economic headwinds.

Shobhit Agarwal, MD & CEO – ANAROCK Capital, says, “PE investment volumes have steadily declined over the past five years, dropping from USD 6.4 billion in FY21 to approximately USD 3.7 billion in both FY25. This represents a 43 per cent decrease from FY21 levels, primarily driven by reduced foreign investor activity amid heightened global macroeconomic uncertainty and geopolitical volatility.”

The concentration of capital in fewer, larger transactions has increased significantly. In FY25, the top 10 deals accounted for 81 per cent of total PE investment value, up from 69 per cent in FY24. This spike is largely attributed to the mega Reliance–ADIA–KKR hybrid deal, which alone contributed to ~42 per cent of FY25’s total value.

“While the number of deals dropped sharply to 39 in FY25, from 51 in FY24 – a decline of 24 per cent, total investment declined by 3 per cent,” says Aashiesh Agarwaal, Senior Vice President & Investment Advisor, ANAROCK Capital. “This has led to a spike in average deal size—from $75 million to $94 million, highlighting a more focused and strategic deployment of capital.”

In FY25, pan-India / multi-city transactions accounted for 52 per cent of all deal value—up from 47 per cent in FY24 and just 25 per cent in FY23

“Barring the Covid year, pan-India and multi-city transactions have been rising steadily – increasing from 14 per cent in FY19 to 52 per cent in FY25. This underscores our view of a greater sector formalization and a shift toward large, diversified portfolios,” adds Aashiesh Agarwaal, Senior Vice President & Investment Advisor, ANAROCK Capital.

FY25 saw a significant deviation in funding structure, with hybrid deals surging to 42 per cent of total PE capital—primarily due to the Reliance-ADIA-KKR transaction. Equity and debt investments dropped to 37 per cent and 21 per cent respectively.

Logistics and warehousing emerged as the clear frontrunner in FY25, attracting 48 per cent of PE funding, the highest in five years. This marks a sharp pivot from the 8–21 per cent range seen from FY21 to FY24.

Market Insights by Sector

Residential Real Estate

After a stellar run, the residential sector has entered a consolidation phase, with average deal size dropping to $117 million (Q2–Q4 FY25) from $233 million (Q1 FY23–Q4 FY25). However, international equity interest is emerging, as seen in Blackstone’s investment in Kolte Patil and Alpha Wave’s deal with Oberoi Realty.

Commercial Real Estate

Offices saw a steep decline in investment—$806 Mn in FY25 vs. $2.2 Bn in FY24. While leasing activity remains robust, investor caution persists due to high interest rates and geopolitical stress. The outlook is optimistic with potential rate cuts on the horizon.

Retail Real Estate

Retail continues to thrive on strong consumer demand. While mall operators like DLF, Nexus, and Phoenix are expanding aggressively, PE activity remains limited due to dominance by well-funded players and REITs.

Industrial & Logistics

Warehousing demand is buoyed by manufacturing, e-commerce, and 3PL growth. A clear shift toward Grade A assets and ESG-compliant formats is being observed, reinforcing long-term institutional interest.

Outlook

With capital consolidating around quality assets, and global investors re-engaging, Indian real estate is poised for a new chapter of strategic growth. The FLUX FY25 edition captures these transitions in detail, laying the groundwork for investment strategies and sectoral shifts in FY26 and beyond.