According to Anarock data shows that private equity (PE) investments in the Indian real estate sector experienced further decline during financial year 2024-25 (FY25) because of changing investor tastes alongside worldwide economic hurdles.

Real estate PE investments dropped 43% throughout five years from their FY21 peak of $6.4 billion to their FY25 value of $3.7 billion. The recorded investments reached $3.8 billion for the fiscal year 2024.

The transaction volume declined substantially in FY25 by reaching only 39 deals while FY24 recorded 51 deals. Average transaction deals grew to reach $94 million during this period while the previous figure stood at $75 million.

According to Shobhit Agarwal who serves as the Managing Director and CEO of Anarock Capital the PE investment volumes experienced a continuous decline throughout the past five years starting from $6.4 billion in FY21 before settling at $3.7 billion in FY25. The reduction of 43% between FY21 and FY25 operating levels stems mainly from reduced foreign investment activity because of rising macroeconomic instability and geopolitical tensions worldwide.

In FY25 hybrid financing arrangements became the primary method of PE funding totalling 42% of total investments mainly because of the Reliance-ADIA-KKR transaction. The proportion of equity along with debt investments decreased to 37 percent while debt investments comprised 21 percent.

The biggest deal in Real Estate PE transactions during FY25 involved Shapoorji Pallonji and GIC-Xander that received Rs 2,150 crore ($258 million) whereas the top debt deal took place between Elan Group and Kotak Realty as they provided Rs 1,200 crore ($143 million) to the Gurugram-based developer.

Foreign capital investments showed significant growth in FY25 reaching $3.1 billion while they had amounted to $2.6 billion during FY24. Indian real estate experienced a substantial growth in foreign investment which boosted their overall market share to 84 percent during FY25 when compared to 68 percent in the previous year.

The report indicated that the residential market entered a consolidation phase because Q2–Q4 FY25 average transactions reached $117 million while previous 12 quarters averaged $233 million.

Blackstone invested Rs 1,167 crore in Kolte Patil while Alpha Wave partnered with Oberoi Realty through a Rs 1,250 crore transaction.

Office sector investment amounts plunged dramatically from $2.2 billion in the previous fiscal year to $806 million in the current year. The real estate leasing market remains strong yet investors maintain a cautious stance because of rising interest rates alongside geopolitical uncertainties. The forecast signals positive trends because future interest rate reductions are expected by experts according to the report.