In a significant shift in India’s investment landscape, Alternative Investment Funds (AIFs) have experienced explosive growth, with real estate emerging as the top sector for investments. According to the latest SEBI data compiled by ANAROCK Research, real estate accounted for the largest share of AIF investments in the country, reaching INR 75,468 crore in H1 FY2025, which represents 17% of the total AIF investments of INR 4,49,384 crore across various sectors.
Other sectors benefiting from AIF investments include IT/ITeS, Financial Services, NBFCs, Banks, Pharma, FMCG, Retail, Renewable Energy, and more. The total AIF commitment across these sectors has grown substantially over the years, reflecting the increasing appeal of alternative investment strategies.
A Breakdown of AIF Investments by Sector:
| Sector | Investment (INR Cr) |
|---|---|
| Real Estate | 7,54,68 |
| IT/ITeS | 2,78,15 |
| Financial Services | 2,57,82 |
| NBFCs | 2,15,03 |
| Banks | 1,82,42 |
| Pharma | 1,72,72 |
| FMCG | 1,16,80 |
| Retail | 1,13,79 |
| Renewable Energy | 1,06,72 |
| Others | 2,29,571 |
| Total | 4,49,384 |
As of H1 FY2025, real estate investments have risen by 10% from INR 68,540 crore in FY2024, further demonstrating the sector’s dominance in the AIF space. This growth comes amid a sharp increase in overall AIF activity, with a notable rise in funds available for investment in the past decade.
Surge in AIF Activity and Commitment Growth
AIFs in India have witnessed a remarkable rise, with commitments increasing by over 340% from INR 2,82,148 crore in FY2019 to INR 12,43,083 crore in H1 FY2025. Between FY2013 and FY2024, the sector saw an impressive compound annual growth rate (CAGR) of 83.4%, underlining the growing role of AIFs in India’s investment ecosystem.
Anuj Puri, Chairman of ANAROCK Group, noted, “The surge in AIF activity is primarily driven by Category II AIFs, which include a combination of Real Estate Funds, Private Equity, Debt Funds, and Fund of Funds (FoF). Over the past five years, Category II AIFs have accounted for nearly 80% of total AIF commitments, reflecting their dominance in the market.”
Shift in Investor Participation
Traditionally, domestic investors have been the key source of AIF funding. However, foreign portfolio investors (FPIs) have also been increasing their participation, particularly in Category II AIFs. In this category, FPIs now hold almost equal footing with domestic investors, further fueling the growth of AIF investments.
Real Estate’s Growing Reliance on AIFs
A significant trend in the AIF space is the increasing reliance on equity financing in the real estate sector. AIFs have become a vital source of funding for real estate developers, offering customized financing solutions that address the specific capital needs throughout a project’s lifecycle—from construction to long-term financing.
In 2024, the real estate sector raised INR 28,560 crore in private equity investments, contributing to 17% of the total sectoral investments. Additionally, Qualified Institutional Placements (QIPs) raised INR 12,801 crore in the first nine months of the year, again making up 17% of total investments.
Conclusion
The rise of AIFs, particularly in the real estate sector, reflects a shift in investor sentiment towards alternative investment strategies, with a growing preference for high-return assets like real estate. This trend is poised to continue as both domestic and foreign investors recognize the potential of AIFs, particularly in real estate, as a means of generating substantial returns.
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