India’s real estate sector experienced a significant surge in capital raising activity in FY25, with a threefold increase compared to the previous year. According to a report by Equirus Capital, the sector raised a total of ₹32,852.6 crore (US$ 3.85 billion) through 17 deals, a record high that underscores growing investor confidence, especially from private equity (PE) firms and merger & acquisition (M&A) deals.

This performance is particularly notable considering that listed real estate stocks across all market capitalisation categories (large, mid, and small-cap) underperformed the Sensex’s 7.4% growth. However, REITs (Real Estate Investment Trusts) stood out by delivering a 12.2% return, reflecting increasing investor appetite for structured real estate investment vehicles.

Capital Raising Hits All-Time High in FY25

The ₹32,853 crore mobilised in FY25 represents a threefold increase compared to FY24 and reflects the robust appetite for real estate as an investable asset class. The primary growth drivers behind this capital inflow include:

• Heightened private equity participation

• Strategic M&A activity

• An increase in average deal size

This trend suggests that investors are increasingly confident in the formalisation and institutionalisation of the real estate sector, especially as regulatory and transparency standards improve.

PE and M&A Deals Dominate Investment Activity

The majority of the ₹32,853 crore came from private equity and strategic M&A transactions. These deals involved both domestic and global investors, highlighting the broad-based interest in Indian real estate. Equirus Capital attributes this rise to:

• A shift towards formal, scalable platforms in real estate

• Strong underlying demand in residential, commercial, and hospitality segments

• The emergence of specialised funds and strategic buyers looking to gain long-term exposure

As India continues to urbanise and digitise, real estate remains a key focus area for infrastructure development and investment alike.

REITs Outperform While Listed Real Estate Stocks Lag Behind

While traditional real estate stocks failed to match the Sensex’s gains, REITs emerged as a bright spot, delivering 12.2% returns in FY25. This performance demonstrates a growing shift among investors towards stable, income-generating assets such as REITs, which offer:

• Regular dividends from rental income

• Professional asset management

• Transparency and regulatory oversight

Since FY20, cumulative fund mobilisation via REITs and InvITs (Infrastructure Investment Trusts) has surpassed ₹1.6 lakh crore (US$ 18.74 billion). This growth has been driven by:

• Expanding asset bases

• Robust institutional backing

• Increased retail investor participation

The consistent performance of REITs reflects a strong alignment of investor interest with India’s commercial property market, especially in Grade-A office spaces.

Institutionalisation and Regulatory Confidence Fuel Growth

The real estate sector’s structural transformation is evident in the increasing institutionalisation of capital, which boosts long-term resilience. Factors contributing to this include:

• RERA (Real Estate Regulation and Development Act), which ensures transparency

• Improved disclosures and compliance by developers

• Diversification of investment avenues (REITs, InvITs, AIFs, etc.)

• Digitisation of land records and transaction workflows

These developments have made India’s real estate market more accessible to institutional and global investors, ensuring sustained long-term capital flows.

FY26 Begins Strong With Over ₹3,176 Crore in Fresh Deals

Even as FY25 closed with record numbers, the momentum has carried into the first month of FY26, with four deals totalling ₹3,176 crore (US$ 372 million) already concluded. The major transactions include:

• Eldeco Group – ₹1,503 crore (US$ 176 million)

• DLF Kolkata TTSEZ – ₹674 crore (US$ 79 million)

• SAMHI Hotels – ₹751 crore (US$ 88 million)

• Zillion Hotels & Resorts – ₹247 crore (US$ 29 million)

These early deals are indicative of continued investor confidence and suggest that FY26 could build upon or even surpass FY25’s fundraising records.

Hospitality and Commercial Real Estate Attracts Capital

The deals by SAMHI Hotels and Zillion Hotels & Resorts reflect a renewed investor focus on hospitality and travel-related infrastructure, buoyed by:

• Post-COVID recovery in tourism

• Rising demand for leisure and business travel

• Increased focus on domestic travel and MICE (Meetings, Incentives, Conferences, and Exhibitions) segments

Meanwhile, DLF’s Kolkata TTSEZ deal showcases the continued investor interest in special economic zones and tech parks, driven by:

• Surging demand for IT office spaces

• Expansion of multinational companies

• Robust leasing activity in top Indian cities

Residential Real Estate Remains a Core Growth Area

While commercial and hospitality segments draw large capital, residential real estate continues to be the backbone of India’s real estate story. Eldeco’s ₹1,503 crore deal points to the following residential growth drivers:

• Rising disposable incomes and nuclear families

• Government incentives like PMAY and interest subventions

• Suburban expansion of Tier 1 cities and mid-income housing demand

These factors ensure that residential demand remains robust, especially in the affordable and mid-income segments.

Long-Term Outlook: Real Estate Positioned for Sustained Expansion

The trends observed in FY25 and early FY26 suggest that India’s real estate sector has moved into a new phase of capital sophistication and investor maturity. The key takeaways for stakeholders include:

• Real estate is increasingly institutionalised, with growing participation from private equity funds, pension funds, sovereign funds, and global real estate platforms.

• REITs and InvITs offer a stable and regulated alternative, especially appealing to retail and long-term investors.

• Despite short-term underperformance of real estate stocks, the underlying sector fundamentals remain strong, supported by reforms, demand, and digitisation.

Conclusion: From Cyclical to Structural Growth

India’s real estate sector has transitioned from a cyclical market to one with structural growth prospects. With record capital inflows, increasing transparency, and rising investor trust, it is poised to play a central role in India’s economic expansion over the coming decade.

The sector’s continued evolution through private equity, REITs, and strategic deals indicates that real estate is no longer just a developer-driven space, but one that is shaped by data, compliance, and institutional discipline.

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