Domestic capital rises as global caution prevails in Indian real estate
India's real estate market is witnessing a decisive shift in the investment landscape, as domestic capital takes center stage amid global caution, reveals Colliers India's Q2 2025 investment overview. Institutional investments touched USD 3.0 billion in H1 2025, with domestic players contributing nearly half of the inflows for the first time.After a relatively modest start to the year, investments rebounded strongly in Q2 2025, rising 29% sequentially to USD 1.7 billion. While this was still 15% lower than H1 2024 levels, the momentum in domestic capital offers a clear sign of confidence in the sector's fundamentals, even as foreign investors tread carefully amid global macroeconomic headwinds.Domestic investments surged 53% year-on-year to USD 1.4 billion in H1 2025, now comprising 48% of total real estate inflows—up from just 16% in 2021. In contrast, foreign capital flows shrank 39% YoY to USD 1.6 billion, impacted by inflationary pressures, tighter credit flows, and global economic uncertainty.'Domestic capital has become a stabilizing force for Indian real estate,' said Badal Yagnik, CEO of Colliers India. 'Over 60% of domestic investments in H1 2025 were directed toward residential and office assets, underscoring investor confidence in core segments.'A standout example is the USD 175 million investment by HDFC Capital Advisors and Eldeco Group in the residential segment across multiple cities, signaling strong domestic institutional appetite for housing-led projects.
Residential real estate emerged as the top performer in Q2 2025, drawing 31% of the quarterly investments and 27% of H1 2025 inflows—up 27% YoY. This resurgence was driven by healthy end-user demand, affordability, and a more favorable interest rate environment.Mumbai-based Ashwin Sheth Group secured USD 65 million in residential funding from private equity firm PAG, showcasing targeted interest in high-quality housing developments.The mixed-use category also gained traction, accounting for 26% of Q2 and 21% of H1 investment volumes. Century Real Estate attracted USD 215 million from Ares Asia and SC Lowy for a large mixed-use project in Bengaluru, reflecting investor preference for integrated developments.One of the most notable turnarounds in Q2 2025 came from the retail sector, which garnered USD 380 million—a dramatic shift after negligible activity in previous quarters. This was led by a landmark deal in Kolkata, where Blackstone invested USD 380 million in South City Projects, underscoring rising institutional appetite for high-performing retail assets.'Retail is staging a steady comeback, driven by strong consumption, urbanisation, and evolving spending patterns,' said Vimal Nadar, National Director & Head of Research, Colliers India. 'REITs and institutional investors are actively scouting for quality retail opportunities across key metros.'Retail's overall share in H1 2025 stood at 13%, compared to negligible levels a year ago, signaling a broader revival in physical retail infrastructure.City-wise, Mumbai and Bengaluru emerged as investment hotspots, jointly contributing 39% of H1 2025 inflows. Mumbai led with USD 656 million, up a staggering 408% YoY, driven by key office and residential deals. Bengaluru followed with USD 499 million, with 57% of its share in residential and office segments.While Kolkata's sudden leap—from zero in H1 2024 to USD 380 million in H1 2025—was powered solely by the Blackstone retail deal, Delhi NCR and Hyderabad saw sharp YoY declines of 47% and 15% respectively. Chennai witnessed a steeper drop of 69%, and Pune too saw inflows fall by over 90%, showing concentration of capital in top-tier and high-potential deals.The data also reveals a cooling in industrial and warehousing, which contributed 10% to H1 2025 investments but saw zero inflows in Q2 2025. The sector's peak in Q1—highlighted by Welspun One's USD 229 million warehousing deal—could not be sustained in the second quarter, possibly due to project pipeline issues or valuation mismatches.
Alternative assets—comprising data centers, student housing, senior living, and life sciences—accounted for 5% of both Q2 and H1 inflows. Notably, GIC's USD 88.2 million investment in SAMHI Hotels reinforced the growing appeal of hospitality and allied sectors. REITs continued to play a critical role, as seen in Mindspace REIT's USD 235 million deal for office assets in Hyderabad earlier this year. While foreign flows declined overall, institutional investors still found value in select core assets.India's real estate sector continues to navigate a dynamic landscape shaped by domestic strength and global caution. The increasing prominence of homegrown capital is a structural shift, signaling greater maturity, institutional depth, and confidence in long-term fundamentals.As domestic investors deepen exposure and foreign players selectively re-engage, the market is expected to remain resilient across residential, retail, and mixed-use segments. With REITs broadening access and large-ticket deals returning, H2 2025 could see an even stronger momentum—especially if global macroeconomic signals stabilize.
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