Real estate: Institutional funding jumps 122% in Q2 as sector draws $1.8bn

Institutional investments into India’s real estate sector surged to $1.80 billion in the second quarter of 2025, marking a sharp 122 per cent rise over the previous quarter, according to a new report by real estate consultancy firm Vestian.

The rebound was led largely by foreign investors from the US, Japan and Hong Kong, who collectively accounted for around 89 per cent of the foreign inflows, primarily targeting commercial assets.As per news agency ANI, despite the impressive quarterly rise, the report noted that the inflows were still down 42 per cent year-on-year from the highest-ever quarterly investment recorded in the same period last year. Foreign investments contributed $1.19 billion of the total, representing a 46 per cent annual drop and a decline in their overall share from 71 per cent in Q2 2024 to 66 per cent this year.According to Vestian, this shift is reflective of a more cautious outlook among foreign investors, who are now favouring co-investment models over direct ownership to minimise risk amid continued geopolitical tensions and global economic uncertainty.

Co-investments accounted for 15 per cent of total institutional investments in Q2, nearly double the 8 per cent share seen in the previous quarter.“While overall inflows remained lower on an annual basis, the substantial quarterly growth reflects renewed investor confidence supported by robust macroeconomic fundamentals and strong inherent demand,” said Shrinivas Rao, FRICS, CEO of Vestian, as cited by ANI. He added that the momentum is likely to continue into FY26, buoyed by projected GDP growth exceeding 6 per cent and recent repo rate cuts that are expected to lower borrowing costs and improve credit availability for the sector.Commercial real estate attracted the major share of institutional capital in Q2, while residential properties accounted for only 11 per cent of the total inflows. The remaining investment was directed towards diversified asset classes.On the domestic front, investment activity remained subdued. Domestic investors contributed just 19 per cent of total institutional investments, compared to 21 per cent a year ago. In absolute terms, domestic inflows fell to $336 million, down 47 per cent year-on-year and 28 per cent lower than the previous quarter.The report attributed the pullback in domestic investments to persistent uncertainty stemming from global conflicts and trade disruptions, which have impacted investor sentiment and risk appetite.Despite these challenges, the report sees scope for continued capital inflows in the coming quarters, particularly if macroeconomic indicators remain stable and supportive policy measures continue.