PE inflow in real estate at $1.73 bn, set to drop in H1: Knight Frank

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Private equity (PE) investments in the Indian real estate sector stood at $1.73 billion till June 15 this year and are likely to fall sharply in the first half of 2025 as investors have become cautious, according to Knight Frank India.

The PE inflow in real estate stood at $2.96 billion in the first half of 2024.

Real estate consultant Knight Frank India on Thursday attributed the likely fall in PE investments to "...a shift in global capital flows due to elevated interest rates, tightening liquidity, and increased investor scrutiny over risk-adjusted and post-tax returns".

The office segment attracted the highest share of PE capital at $706 million till June 15 of the 2025 calendar year.

Indian real estate received $4.9 billion in PE investments in the full 2024 calendar year. The sector attracted record PE inflow in 2018 at $7.8 billion.

The consultant noted that western institutional capital receded further so far this year, primarily due to narrowing India-US yield spread, Indian rupee depreciation (from 83.1 in Dec 2023 to 85.6 per $ in H1 2025), and India's 12.5 per cent long-term capital gains tax, which affects post-tax returns.

Meanwhile, it said that domestic capital has stepped up substantially.