USA, Japan, and Hong Kong dominate foreign inflows as institutional investment rebounds 122% quarter-over-quarter amid geopolitical uncertainty
India’s real estate sector attracted $1.80 billion in institutional investments during Q2 2025, marking a dramatic 122% quarterly surge despite a 42% year-over-year decline from record highs, according to new Vestian Research data.
Foreign Capital Drives Recovery
Foreign investors led the charge, pumping $1.19 billion into Indian real estate markets, though this represented a 46% drop from the $2.21 billion recorded in Q2 2024. The trio of USA, Japan, and Hong Kong accounted for a commanding 89% share of foreign inflows at $1.06 billion, maintaining their dominance in India’s property investment landscape.
“The shift from direct investments to co-investments by foreign investors underscores their cautious approach,” Vestian analysts noted, highlighting how global investors are mitigating risks amid geopolitical conflicts and macroeconomic instability.
Commercial Assets Capture Lion’s Share
Foreign capital showed a clear preference for commercial properties, with 69% of investments from the top three countries flowing into office buildings, retail centers, and industrial assets. Residential properties attracted only 11% of total foreign investments, while diversified assets captured the remainder.
Co-investments emerged as a key trend, nearly doubling their market share to 15% from 8% in the previous year, reflecting investors’ preference for shared risk strategies in uncertain times.
Domestic Sentiment Weakens
Indian institutional investors scaled back significantly, contributing just $336 million or 19% of total investments—down from 21% in Q2 2024. This 47% annual decline and 28% quarterly drop signals cautious domestic sentiment amid ongoing market uncertainty.
Mixed Signals for Sector Outlook
While the quarterly rebound offers hope for recovery momentum, the substantial year-over-year decline highlights persistent challenges facing India’s real estate investment market. Foreign investment share decreased from 71% to 66% year-over-year, suggesting a more balanced but cautious investment environment.
The data reveals a market in transition, where global institutional capital remains committed to Indian real estate opportunities but with increasingly sophisticated risk management strategies. Commercial real estate continues attracting premium valuations, while residential markets face headwinds from both foreign and domestic investors.
As geopolitical tensions and trade uncertainties persist, the sector’s ability to sustain quarterly growth momentum will depend heavily on continued foreign investor confidence and improved domestic market sentiment in upcoming quarters.
