Domestic investors followed a similar trend, with their share dropping to 30% in 2024 from 35% in the previous year. However, they too recorded a 36% growth in investment value.

A notable highlight was the rise of co-investments—joint funding by foreign and domestic investors—which surged to 16% of total investments in 2024, compared to a negligible share in 2023. Co-investments registered a remarkable 61-fold increase in value, as foreign investors leveraged the local expertise of domestic partners amid macroeconomic uncertainty.

Institutional investments in real estate reached USD 6.8 billion in 2024, marking a 61% year-on-year increase and surpassing pre-pandemic levels. This resurgence comes after a four-year decline, driven largely by the industrial and warehousing sector, which benefited from robust e-commerce and quick-commerce demand.

Shifts in Asset Investment

The commercial real estate segment, which has traditionally dominated investments, accounted for 35% of total investments in 2024, down from 61% in 2023. The decline reflects a slowdown in the IT-ITeS sector, although growing demand for Global Capability Centers (GCCs) is expected to renew interest in office spaces.

Meanwhile, the residential sector attracted USD 2 billion in investments, representing 30% of the total and a 171% increase from 2023. Similarly, the industrial and warehousing sector grew by 203%, increasing its share from 15% in 2023 to 28% in 2024.

Yearly Investment Trends

Institutional investments rebounded in 2024 after consecutive declines since 2020. The yearly investment trend highlights the following:

Expert Outlook

Shrinivas Rao, FRICS, CEO of Vestian, noted, “Despite a slow start, institutional investments in 2024 exceeded pre-pandemic levels. However, 2025 could pose challenges due to geopolitical tensions, global economic slowdown, and elevated inflation. A potential repo rate cut by the RBI could stimulate real estate activity, attracting more investors.”

Return-to-office policies, government initiatives like the Production Linked Incentive (PLI) scheme, and a focus on affordable housing are expected to boost real estate demand and investor participation in the coming years.

Key Insights:

• Foreign Investors: 54% share, USD 3.7 billion investments.
• Co-Investments: 16% share, 61-fold increase in value.
• Sector Growth: Residential investments up by 171%; industrial and warehousing up by 203%.
• 2024 Total Investments: USD 6.8 billion, up 61% year-on-year.

Also Read: cross-border investment

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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:

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.

Also Read: Residential Market Sees Growth in Sales and Value, Led by Luxury Segment in Q3 2024

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In addition to AIF investments, the real estate sector also raised ₹12,801 crore through Qualified Institutional Placements (QIPs) during the same period, further emphasizing the strong investor confidence in the market. These investments highlight the sector’s growing appeal, bolstered by increasing demand and a steady reduction in unsold inventory in major cities across the country.

The sector’s performance is driven by a growing reliance on equity financing, particularly through Category II AIFs, which include real estate funds, private equity, and debt funds. Over the past five years, Category II AIFs have accounted for nearly 80% of total AIF commitments, reflecting their flexibility and tailored investment strategies.

Foreign Portfolio Investors (FPIs) have also ramped up their involvement, with their participation in Category II AIFs now matching that of domestic investors in funding key real estate projects.

Prashant Sharma, President of NAREDCO Maharashtra, highlighted the crucial role of AIFs in bridging funding gaps within the real estate sector. “The record ₹75,468 crore invested in real estate through AIFs in H1 FY25 underscores the sector’s resilience and growth potential. With strong sales in major cities and declining unsold inventory, investors are recognizing the sector’s long-term value. AIFs are not just funding projects—they’re shaping the future of urban infrastructure and housing in India,” he said.

Kuldeep Jain, Founder and CEO of Build Capital, also emphasized the transformative impact of AIFs on the real estate landscape. “The growing reliance on Category II AIFs highlights their role in reshaping the sector. These investment vehicles channel significant capital into the industry while partnering with reputed developers, ensuring strategic asset selection, prime location analysis, and timely financial closure. This comprehensive approach facilitates project completion and delivery, driving higher, secured returns for investors. AIFs are meeting the increasing demand for housing and urban infrastructure, making real estate a preferred asset class for institutional investors.”

Anarock’s data reveals that more than 1.36 million housing units have been launched across the top seven cities between 2021 and September 2024. During the same period, around 1.44 million units were sold, contributing to a 10% decline in unsold inventory despite the high supply rate. This trend highlights the sector’s growing appeal to institutional investors.

The steady increase in AIF commitments, with both domestic and foreign investors contributing, is expected to continue driving the growth of India’s real estate sector. As developers tap into these funding resources to meet the rising demand for housing and infrastructure, the sector is set to maintain its dominant position in the investment landscape.

With innovative funding mechanisms like AIFs leading the charge, the real estate sector is poised to remain a cornerstone of India’s economic growth.

Also Read: Central Suburbs: Mumbai’s Key Hotspot for Real Estate Investments

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