India's Real Estate Sector continues to demonstrate exceptional momentum in capital markets, with significant fundraising activity and improved affordability metrics positioning the industry for sustained growth.

Strong Capital Market Performance in FY26

The real estate sector raised ₹17,867 crore through 11 capital market deals during April-December FY26, according to Equirus Capital. This performance has already matched the total number of deals completed in FY25, with both deal count and fundraising amounts likely to surpass previous highs.

The deals highlight sustained investor appetite across various funding instruments, demonstrating the sector's growing maturity and institutional acceptance.

Historical Fundraising Patterns Since FY18

Since FY18, the real estate industry has collectively raised ₹72,331 crore across different market segments. REITs have emerged as the largest beneficiaries of this capital influx, reflecting the growing institutionalization of real estate investments.

Housing Affordability Reaches Three-Decade Best

Housing affordability in India has reached its most favorable level in nearly 30 years, driven by multiple supportive factors. The property price-to-annual income ratio has declined dramatically from 22.00 in 1995 to 3.30 in 2024, reflecting substantial improvement in affordability across urban India.

Key supporting factors include:

• Steady home loan rates since FY21
• Stable rental yields
• Rising income levels across urban markets
• Expected narrowing of gap between home loan rates and rental yields to below 500 basis points in FY26

Market Dynamics and Demand Patterns

Real estate has emerged as the most preferred asset class in H1 2025, supported by changing lifestyles, rising aspirations, income growth, and favorable financing conditions. Residential real estate across India has maintained healthy absorption levels that match or exceed new supply over recent years.

The top seven cities witnessed robust sales momentum during calendar year 2024, supported by a steady pipeline of new launches. This balance between supply and absorption is sustaining pricing power and developer confidence across key markets, indicating controlled inventory levels and healthy demand fundamentals.

Sector Outlook and Growth Trajectory

Equirus Capital maintains a constructive outlook for the sector, citing strong fundamentals supported by improved affordability, institutional capital inflows, and sustained end-user demand. The sector's upcycle is expected to continue in the near term, backed by strong economic growth and consumption trends. With REITs, listed developers, and capital markets playing an increasingly important role in sectoral funding, the Indian real estate sector appears well-positioned to sustain its growth trajectory in the coming years.

Institutional investments in the Indian real estate sector achieved a historic milestone in 2025, reaching $8.5 billion with a 29% year-on-year growth, according to a report by Colliers India released on Tuesday. This record-breaking performance reflects the growing confidence of both domestic and international investors in India's real estate market.

Domestic Capital Drives Investment Surge

The investment landscape witnessed a significant shift in 2025, with domestic institutional capital emerging as the primary growth driver. The composition of investments showed a clear preference for local funding sources over foreign capital.

Cross-border investments showed signs of recovery in the final quarter, indicating a gradual improvement in global investor sentiment. The report noted that this recovery comes at a time when the global economy is holding up better, with signs of trade normalcy even amid ongoing tariff negotiations.

Record-Breaking Quarterly Performance

The fourth quarter of 2025 marked a significant milestone, recording the highest-ever quarterly inflows at $4.20 billion. This exceptional performance in the final quarter alone accounted for nearly two-thirds of the annual capital deployment and coincided with strong Grade A office space uptake across the country's major office markets.

Office Sector Leads Investment Activity

The office sector dominated the investment landscape, demonstrating robust growth and investor confidence. The sector's performance was supported by rising participation from both domestic and foreign investors.

Vimal Nadar, National Director and Head of Research at Colliers India, highlighted the significance of this growth, noting that "the year also marked the listing of fourth office-focused REIT and notable acquisitions by older REITs, marked by superior tenant quality, higher occupancy levels, and strong rental growth."

Geographic Distribution and City Performance

Bengaluru and Mumbai emerged as the leading destinations for real estate investments, cumulatively accounting for approximately half of the total inflows in 2025. These two metropolitan cities attracted around $4.00 billion in investments, with office assets driving close to three-fourths of the activity in both locations.

The geographic spread of investments showed broad-based growth, with five out of seven major Indian cities experiencing year-on-year increases in capital inflows during 2025.

Future Outlook and Market Consolidation

Nadar forecasted a greater degree of institutionalization and consolidation in the coming years, supported by cross-border capital flows. The research indicates that over 370 million square feet of existing office space could potentially be included in future REITs, suggesting significant opportunities for continued growth and market development in the Indian real estate sector.