Institutional investors expand role in shaping Indian real estate landscape
31 Aug 2025
Synopsis
India's real estate sector, valued at USD 265 billion in 2024, is projected to near USD 1 trillion by 2030, making it a prime destination for institutional capital. Regulatory reforms like RERA, GST, and eased FDI norms have boosted transparency, attracting pension funds, sovereign wealth funds, and private equity, with inflows expected to reach USD 6-7 billion in 2025. Grade A offices remain the largest draw, supported by strong absorption and REIT success, while affordable housing and warehousing are gaining momentum. Sustainability is now central, with 40% of new supply green-certified. Annual institutional inflows are projected to cross USD 8 billion by 2027.
The Indian real estate sector has become one of the leading destinations for institutional capital, with the market valued at around USD 265 billion in 2024 and projected to approach USD 1 trillion by 2030. The expansion of urban centres, demand for modern commercial spaces, and supportive government policies have created a more transparent and structured environment, drawing the attention of pension funds, sovereign wealth funds, and private equity players.
One of the key drivers of this shift has been regulatory reform. The introduction of the Real Estate (Regulation and Development) Act (RERA) and the Goods and Services Tax simplified processes and improved accountability. Easing of Foreign Direct Investment rules has also encouraged 100% FDI under the automatic route in construction-development, opening the market to foreign investors. As a result, private equity investments in the sector crossed USD 30 billion between 2018 and 2024, with inflows expected to touch USD 6-7 billion in 2025 alone, according to CBRE India.Commercial real estate, particularly Grade A office spaces, remains the biggest draw. Since 2019, India has recorded annual office absorption of over 50 million sq. ft., placing it among the largest global office markets. Bengaluru, Hyderabad, and Gurugram continue to dominate, driven by IT expansion and global capability centres. Rent-yielding assets have been particularly appealing, while the success of Real Estate Investment Trusts has created an accessible avenue for international investors. Currently, four listed REITs command a combined market capitalisation exceeding USD 12 billion.
Residential real estate is now regaining institutional interest. With developers prioritising affordable and mid-income housing, nearly 70% of overall demand is concentrated in these segments. Knight Frank reported an 18% year-on-year rise in institutional investment in housing during the first half of 2025. Government initiatives such as the Pradhan Mantri Awas Yojana are further encouraging participation in large-scale housing projects.Warehousing and industrial spaces have also emerged as high-growth segments, buoyed by e-commerce and the government's push for manufacturing under 'Make in India' and Production-Linked Incentive schemes. The warehousing market is projected to reach 500 million sq. ft. by 2026, expanding at nearly 9% CAGR. In 2025, warehousing accounted for almost 25% of institutional inflows, compared with 15% just three years ago.
Sustainability and ESG compliance are becoming essential considerations. Over 40% of new office supply is now green-certified, with investors preferring eco-friendly and energy-efficient assets. This trend aligns with global capital requirements, while also giving developers access to lower-cost funding.Looking ahead, institutional participation is expected to deepen further, with JLL projecting annual inflows to exceed USD 8 billion by 2027. India's demographic strength, rapid urbanisation, and investor-friendly policies continue to reinforce its position as a long-term investment hub.As participation grows, the market is likely to see greater professionalism, better governance, and more innovative financing structures, ultimately transforming Indian urban centres and raising living standards across the country.