India real estate PE investment drops 31% to $1.66 billion; domestic share jumps to 85%

The sector recorded 31 transactions during the nine-month period, compared with 24 in the corresponding period last year. |Image: Magnific

Private equity (PE) investment in India's real estate sector declined 31 per cent year-on-year (YoY) to $1.66 billion during January-September 2026, even as the number of transactions increased, according to a report by Knight Frank India.

The sector recorded 31 transactions during the nine-month period, compared with 24 in the corresponding period last year. However, the average deal size fell 47 per cent to $53 million, reflecting a decline in large-value transactions. Total institutional investment during the period was the lowest in six years.

Domestic investors drive real estate investment

Domestic investors accounted for 85 per cent of India's real estate PE investment during January-September 2026, contributing $1.42 billion. This compares with a 25 per cent share, or $603 million, in the same period last year.

In contrast, foreign investment declined to $240 million, accounting for 15 per cent of total investment, compared with a 75 per cent share in the year-ago period.

Shishir Baijal, International Partner, Chairman and Managing Director at Knight Frank India, said domestic investors were playing a larger role in the real estate market as investors became more selective about their commitments.

"The changing composition of real estate investment is as important as the headline numbers. Domestic capital is playing a much larger role now, contributing 85 per cent of total PE investments in real estate, while investors are becoming more deliberate about the size, structure and risk of each commitment," Baijal said.

He added that investment decisions were increasingly influenced by the returns investors expected and the risks associated with individual opportunities.

"This is not simply a question of capital becoming available or unavailable; it is about where investors see returns that justify the risks. Completed office assets and structured residential credit reflect different approaches to that calculation," he said.

Baijal further noted that India's ability to attract foreign capital would depend on the availability of quality investment opportunities, transparency and investor confidence in the country's long-term economic fundamentals.

Office sector attracts largest share of PE investment

The office sector received $1.18 billion in private equity investment during January-September 2026, accounting for 71 per cent of the total. However, investment in the segment declined 19 per cent YoY.

Completed office projects accounted for 78 per cent of office-sector investments, while equity investments made up 88 per cent of the total.

The residential sector attracted $320 million through 19 deals, registering a 33 per cent decline. Debt and structured credit accounted for 97 per cent of residential investment, while 83 per cent of the funds went towards under-construction projects.

The National Capital Region (NCR) received 63 per cent of total residential investment during the period.

Meanwhile, the warehousing sector recorded $160 million in investment through a single transaction in the July-September quarter. The retail sector did not record any transactions during the nine-month period.

NCR leads among cities

Among cities, the National Capital Region led India's real estate private equity investment with $568 million during January-September 2026, according to the report.

Pune ranked second with $356 million, followed by Chennai with $319 million.

The report highlights a shift in the composition of real estate investment, with domestic capital taking a larger share even as overall investment declined and investors became more selective about deal sizes, investment structures and risk.