Indian Real Estate Sees 16% Dip in Foreign Investment at $3.65 Billion

Foreign investment in Indian real estate declined by 16% in 2025 to $3.65 billion, reflecting a cautious global investment environment marked by geopolitical tensions, elevated interest rates, and capital market volatility. However, the broader real estate investment landscape in India remained resilient, as total institutional investments surged 29% year-on-year to $8.47 billion, driven largely by strong domestic capital participation and sustained demand for office assets.

According to a Colliers India report released on January 6, the Indian real estate sector continued to attract long-term institutional interest, even as foreign investors temporarily moderated their exposure. Office assets once again emerged as the most preferred investment segment, while Bengaluru and Mumbai together accounted for nearly half of total capital inflows during the year.

Institutional investments rise despite drop in foreign capital

Despite the moderation in foreign investment in Indian real estate, overall institutional investments recorded a strong rebound in 2025. Total inflows reached $8.47 billion, marking a 29% increase compared to the previous year. This growth highlights the sector’s structural strength and its ability to attract capital even amid global uncertainty.

The sharp rise in institutional investments was largely supported by domestic investors, who stepped in aggressively to fill the gap left by cautious foreign capital. Improved asset quality, stable yields, and enhanced regulatory transparency have made Indian real estate increasingly attractive for long-term capital deployment.

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Office assets remain top choice for institutional investors

Office assets dominated institutional investment activity in 2025, accounting for 54% of total inflows. Investments into office real estate touched approximately $4.5 billion, nearly double the levels seen in 2024. This surge was supported by strong leasing activity, rising occupancies, and sustained demand for Grade A office spaces across major Indian cities.

The final quarter of 2025 alone accounted for nearly two-thirds of the annual office investments, coinciding with record-breaking absorption levels. Large-ticket transactions and portfolio acquisitions played a key role in reinforcing investor confidence in India’s office market.

Even as foreign investment in Indian real estate softened, office assets remained a core focus for both domestic and cross-border investors due to their income-generating potential and long-term stability.

Bengaluru and Mumbai drive nearly half of total investments

Bengaluru and Mumbai emerged as the biggest beneficiaries of institutional capital in 2025. Together, the two cities attracted close to $4.0 billion in investments, accounting for nearly half of the total inflows during the year.

Bengaluru led the pack with investments of around $2.2 billion, driven primarily by large office transactions and strong technology-sector demand. Mumbai followed with inflows of approximately $1.8 billion, supported by commercial assets and select mixed-use developments.

Office assets contributed nearly three-fourths of the total investments in these two cities, underlining their continued dominance as India’s most mature and liquid real estate markets. Notably, five out of seven major Indian cities recorded a year-on-year increase in capital inflows in 2025, reflecting broad-based growth beyond just the top metros.

Domestic investors emerge as key growth drivers

One of the most significant shifts in 2025 was the rise of domestic institutional capital as the primary driver of real estate investments. Domestic inflows more than doubled year-on-year to $4.8 billion, accounting for 57% of the total investment volume.

This growing participation underscores rising confidence among Indian institutional investors, backed by improving project execution, better governance standards, and predictable regulatory frameworks. Domestic investors have increasingly focused on stabilised, income-generating assets, particularly in the office and residential segments.

As foreign investment in Indian real estate faced short-term headwinds, domestic capital played a crucial role in sustaining investment momentum across asset classes.

Foreign investment in Indian real estate falls 16% in 2025

Foreign investment in Indian real estate declined from the previous year, with total inflows falling 16% year-on-year to $3.65 billion. The dip can be attributed to global macroeconomic uncertainties, including higher borrowing costs, geopolitical risks, and portfolio rebalancing by global funds.

However, the Colliers report noted early signs of recovery in cross-border investments during the final quarter of 2025. Renewed deal activity toward the end of the year indicates a gradual improvement in global investor sentiment and a selective return of foreign capital to Indian assets.

While foreign investment in Indian real estate moderated in the short term, India continues to remain a preferred destination for long-term real estate allocations due to its strong economic fundamentals and urbanisation-driven demand.

Residential, warehousing, and alternative assets gain traction

Beyond office assets, other real estate segments also witnessed healthy investor interest in 2025. The residential sector attracted investments of around $1.6 billion, registering a 36% year-on-year growth and accounting for 18% of total inflows.

Investor interest in residential assets has been supported by favourable demographics, rising household incomes, and expanding housing demand in Tier II and Tier III cities. Joint venture platforms and early-stage project investments have further encouraged both domestic and foreign participation.

Industrial and warehousing assets, along with mixed-use, retail, and alternative segments, collectively attracted approximately $1.5 billion in investments. Growing demand for data centres, logistics parks, co-living spaces, and second homes has driven diversification across asset classes.

Office REITs and consolidation shape long-term outlook

The Indian office market achieved several milestones in 2025, including the listing of the fourth office-focused Real Estate Investment Trust (REIT) and notable acquisitions by existing REIT platforms. These developments reflect the increasing institutionalisation and maturity of India’s commercial real estate market.

High-quality tenant profiles, strong occupancy levels, and consistent rental growth have strengthened investor confidence in REIT-backed office assets. With over 370 million square feet of existing office stock having the potential to be included in future REITs, the sector is expected to see further consolidation and capital inflows in the coming years.

Even as foreign investment in Indian real estate faced temporary moderation, REITs continue to act as an important bridge for long-term global capital participation.

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What lies ahead for foreign investment in Indian real estate

Looking ahead, institutional investments in Indian real estate are expected to strengthen further, supported by expanding domestic capital, improving global risk appetite, and India’s strong macroeconomic fundamentals. Core income-generating assets such as offices, industrial and logistics parks, and residential developments are likely to remain priority areas for investors in 2026.

While foreign investment in Indian real estate may continue to remain selective in the near term, the gradual recovery seen in late 2025 suggests a more stable outlook ahead. As global conditions normalise, India’s transparent regulatory environment and robust demand drivers are expected to attract sustained cross-border interest.

Conclusion

The 16% decline in foreign investment in Indian real estate in 2025 reflects short-term global challenges rather than a loss of long-term confidence. With total institutional investments rising sharply, driven by strong domestic participation and resilient office demand, the sector demonstrated its ability to adapt and grow amid uncertainty.

As domestic capital takes a more prominent role and foreign investors cautiously re-enter the market, Indian real estate remains well-positioned for steady, long-term growth across asset classes.