Summary of this article
Private equity investment volume into NCR hit a record high in H1 2026, witnessing a staggering 522 per cent increase on a yearly basis to $411.1 mn in H1 2026, from $66 mn in H1 2025.
Pune ($355.9 mn) and Chennai ($154.7 mn) came in at number two and three, respectively, underpinned by continued investments from selective residential players and their rising popularity as office and manufacturing hubs.
Office sector was the top performing asset class in H1 2026 accounting for nearly 89 per cent of total PE investments in Indian real estate.
Private equity funds (PE) into Indian real estate continued to show resilience during the first half of 2026, despite several obstacles such as high global interest rates and tighter capital liquidity impacting global investment activity worldwide, as institutional investors pumped $1.13 billion into Indian real estate across asset classes. Although investment inflows have seen a decline of 23 per cent on a year-on-year basis, investments into office accounted for almost nine-tenths of overall PE investments and residential picking up the balance. The National Capital Region (NCR) saw the maximum share of investments among the top eight cities of India, according to Knight Frank India.
The moderation in investment activity reflects a more discerning deployment of capital amid higher global interest rates, tighter financial conditions and increased geopolitical uncertainty. Crucially though, it must be noted that this pullback is not indicative of weakening fundamentals in India’s real estate story. It is reflective of a shifting global investment landscape, where institutional investors are focusing more on risk-adjusted returns, liquidity and certainty of execution rather than growth alone.
Additionally, when choosing between competing investment opportunities, global investors factor returns against what they can earn from a risk-free asset. The spread between India’s 10-year government bond yield and the US 10-year treasury yield was around 440 basis points during 2020-21 which meant investors were earning a significant risk premium by deploying capital into emerging markets. In H1 2026, however, this spread has reduced to around 240 basis points which is almost half of what it was during the pandemic. With US treasury yields having increased from ~1.8% in 2021 to ~4.4% in H1 2026, investors are now able to earn much higher returns by parking their money in low-risk assets in the developed world. Thus, when making investment decisions for EM portfolios, India is now not only competing on growth potential, but also on how efficiently that growth translates into returns that are protected and ultimately realised.
Higher Global Interest Rates Affect Capital Allocation Beyond Spreads
Higher global interest rates don’t just affect spreads. They also affect the hurdle rate for investments. In 2020-21, you could have hit your target return even if spreads over risk free rates were tight. Assume US 10 year yields were around 1.8 per cent, which implied a required return of 8.6 per cent for India. Now assume that by H1 2026, US 10 year yields have risen to ~4.4 per cent. That means your implied required return for India is now close to 11.5 per cent. That’s a very significant rise in your minimum hurdle for deploying capital.
This means that risks you were previously fine with can now price you out of investments. Currency risk, taxes, slippage, construction risk, lease risk and exit risk can now move returns enough to miss the hurdle.
NCR Leads In H1 2026
Private equity funds remained focussed on a few select markets with strong occupier demand, healthy pipelines of quality assets and improved visibility on returns. Private equity investment volume into NCR hit a record high in H1 2026, witnessing a staggering 522 per cent increase on a yearly basis to $411.1 mn in H1 2026, from $66 mn in H1 2025. NCR alone accounted for over one-third of all PE investments in the first half of 2026. Office and residential deals, continuous expansion by infrastructure players, development of a robust corporate occupier market and a substantial pipeline of institutional-grade stock are supporting NCR's attractiveness as an investment destination even as capital continues to be selective.
Pune ($355.9 mn) and Chennai ($154.7 mn) came in at number two and three, respectively, underpinned by continued investments from selective residential players and their rising popularity as office and manufacturing hubs, and strong industrial, logistics and commercial real estate demand. Bengaluru ($115.9 mn) witnessed investments aided by persistent GCC activity and its status as the country's preferred technology and office market. Mumbai ($84.3 mn) benefitted from ongoing interest in the country's financial center, though high valuations capped activity. Hyderabad investments were muted at $4.3 mn due to slower capital deployment.
Office Assets Continue To Attract Maximum Investments
Office sector was the top performing asset class in H1 2026 accounting for nearly 89 per cent of total PE investments in Indian real estate. Investments worth USD 998 mn were pumped into office space in the said period, witnessing a growth of 33% from USD 579 mn in H1 2025.
Occupier demand from Global Capability Centres (GCCs), multinational corporations (MNCs) and domestic companies continues to remain healthy in the office sector.
Private Equity Investors Cautious In Residential Sector
Private equity investments in the residential sector moderated to $128 mn in H1 2026 from $297 mn in H1 2025 as investors turned cautious and selective towards development- driven deals. This slowdown in investment activity is happening even when fundamental metrics of the housing market continue to stay healthy. Residential real estate has seen sector’s increasing formalisation, healthier balance sheets of top developers and strong end-user demand in top markets. Still, developers are facing pressures from higher cost of financing and stricter return expectations from investors, who are now favouring opportunities that can deliver superior risk-adjusted returns.
As a result, debt instruments witnessed a large share of capital deployment during the period. NCR, Pune and Mumbai were the top three markets by investment volume in the residential sector during H1 2026.
