Institutional investments in India’s real estate sector rose 47% year-on-year to USD 813.3 million in the first quarter of 2025, driven by robust residential demand and a resurgence in foreign investor confidence, real estate consultancy Vestian said on Tuesday.
The surge in investment comes despite global macroeconomic uncertainties, signaling strong fundamentals in India’s property market. However, the figure marked a sharp 63% sequential drop from the previous quarter’s USD 2.22 billion, which included several large-ticket transactions.
Foreign capital played a key role in the Q1 rebound, with overseas investors accounting for 43% of total inflows, a significant jump from just 2% in the same quarter last year. In value terms, foreign investments soared to USD 346.9 million from USD 11 million in Q1 2024 — a 3,054% increase.
“Institutional investors are showing growing conviction in India’s long-term economic potential,” said Shrinivas Rao, FRICS, CEO of Vestian. “The increased share of foreign capital reflects India’s appeal amid global economic volatility, underpinned by strong infrastructure push and economic resilience.”
Despite foreign capital gaining ground, domestic investors still led the market with a 57% share in Q1 2025. However, their dominance declined from 98% a year earlier, and the value of domestic investments dropped 14% year-on-year to USD 466.4 million.
Residential sector leads
The residential sector emerged as the top performer, capturing 62% of total institutional investments in Q1 2025, up from 41% in Q1 2024. Investment in the segment surged 125% annually to USD 506.1 million, signaling sustained demand for housing and confidence in long-term returns.
Meanwhile, commercial assets attracted USD 307.2 million, accounting for 38% of total investments. Although the sector’s share declined slightly from 42% a year ago, the value of investments rose 33% year-on-year. Commercial investments include office, retail, co-working, and hospitality projects.
The industrial and warehousing segment saw negligible investments during the quarter, down from USD 58.9 million a year earlier. Still, Vestian expects a revival in the sector driven by rapid e-commerce expansion and falling logistics costs.
Volatility persists
Quarterly trends revealed high volatility in institutional flows over the past year. After falling 31% in Q1 2024, investments surged 464% in Q2 2024, followed by sharp swings in Q3 and Q4. The Q1 2025 decline of 63% from Q4 2024 reflects the absence of large deals, though underlying momentum remains positive.
“While quarter-on-quarter fluctuations are expected, the broader trend indicates rising confidence,” Rao added. “With continued reforms and policy stability, institutional capital will likely accelerate in the coming quarters.”
As India strengthens its position as a preferred investment destination, backed by urbanization, infrastructure development, and a growing middle class, analysts expect institutional investments to gain further traction through 2025.
