Indian Real Estate Sees USD 1.3 Billion Institutional Inflows in Q1

Institutional investments in India's real estate sector reached USD 1.3 billion in the first quarter of 2025, marking a 31 per cent year-on-year increase. The rise was primarily driven by domestic investors, who contributed 60 per cent of total inflows, with investments in office, industrial and warehousing segments leading the momentum.

Domestic investments saw a sharp rise of 75 per cent from the previous year, reaching USD 0.8 billion in the quarter. The office sector accounted for one-third of total inflows at USD 0.4 billion, with Hyderabad attracting over half of these investments. The industrial and warehousing segment, along with residential real estate, represented 47 per cent of the total investments in the quarter.

“Institutional investors continue to demonstrate confidence in India’s real estate market. The 31 per cent year-on-year increase in investments to USD 1.3 billion in Q1 2025 highlights the market’s resilience and potential. Both foreign and domestic investors remain committed to core assets, with office, residential, and industrial and warehousing sectors accounting for 80 per cent of total investments. The outlook for the year remains positive, driven by strong economic fundamentals, demand across asset classes, and a favourable business climate. Policy support and potential monetary easing are expected to sustain capital inflows into both core and alternative real estate assets,” said Badal Yagnik, Chief Executive Officer, Colliers India.

The office segment, despite accounting for USD 434.2 million in Q1 2025, saw a decline of 23 per cent from Q1 2024. Residential investments, on the other hand, surged to USD 302.9 million, reflecting a 195 per cent increase from a year ago. The industrial and warehousing segment recorded USD 307.7 million in inflows, growing 73 per cent year-on-year. Investments in alternative assets, including data centres, life sciences, and senior housing, rose 238 per cent from Q1 2024 to USD 71 million.

The retail sector experienced minimal activity in Q1 2025, with limited investments recorded. Mixed-use assets saw a 46 per cent rise in inflows to USD 191.1 million, while multi-city deals made up 31 per cent of the total investments.

The residential segment saw institutional investments nearly triple from Q1 2024 levels, reaching USD 0.3 billion. This accounted for 23 per cent of total inflows in the quarter, nearly equaling investments in industrial and warehousing. Foreign investors played a significant role, contributing over half of the inflows, driven by a few large transactions.

“India’s residential real estate market has seen sustained demand from end users, leading to an increase in institutional investments. In Q1 2025, inflows in the segment grew multi-fold, reaching USD 0.3 billion. Investors are forming joint ventures with domestic developers to capitalise on the sector’s opportunities. Rising demand for luxury housing, increasing residential prices, and infrastructure development are key drivers. A possible reduction in interest rates could further support investments in mid and affordable housing,” said Vimal Nadar, Senior Director & Head of Research, Colliers India.

Investments in the industrial and warehousing segment continued the momentum from 2024, exceeding USD 0.3 billion in Q1 2025, reflecting a 73 per cent annual rise. The sector’s growth is linked to improved investor sentiment and strong macroeconomic indicators, including the Manufacturing Purchasing Manager’s Index (PMI), which reached 58.1 in March 2025. This marked the highest level since mid-2024, driven by strong demand, increased production, and business optimism.

Investment inflows into alternative real estate assets remained robust at USD 0.07 billion during Q1 2025. Data centres were the primary focus within this category, with a major investment recorded for a planned hyperscale data centre in Mumbai.

Mumbai emerged as the top city for institutional investments in Q1 2025, securing USD 289.1 million, accounting for 22 per cent of total inflows. Bengaluru followed with a 20 per cent share at USD 256.5 million, while Hyderabad attracted 18 per cent of investments, recording USD 235.2 million. Delhi-NCR saw inflows more than double to USD 71.5 million, while Chennai recorded a decline of 60 per cent to USD 48.3 million. Multi-city deals constituted 31 per cent of total investments, reflecting a 310 per cent rise year-on-year.

While investments in Pune remained negligible, Mumbai saw the most significant growth, with inflows increasing 841 per cent compared to Q1 2024.

Institutional investments in real estate are expected to maintain strong momentum through 2025. Factors such as sustained economic growth, strong demand across asset classes, and positive investor sentiment will continue to drive capital inflows. Policy interventions and a potential easing of interest rates may further support investments, particularly in residential and alternative assets.