The real estate market drew $3.1 billion in institutional capital during the first half of 2025 indicating a sharp 37 per cent year-on-year drop in total investment volume, according to data from JLL. While the overall slowdown signals global economic caution, the sector's structural strength appears intact. The decline follows a record-breaking 2024 that had slightly surpassed the $8.4 billion high set in 2007.
Foreign investors continued to dominate, accounting for 68 per cent of the inflow, but domestic institutions are catching up, now commanding 32 per cent of market share, double the participation level just two years ago. Notably, Asia-Pacific-based funds edged out their traditionally dominant North American counterparts, claiming 37 per cent of all inflows.
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Meanwhile, a similar trend was seen as investment timelines grew longer due to geopolitical and economic headwinds. Several large deployments originally planned for this year may now spill into 2026.
In H1 2025, most residential investment came through equity, making up 58 per cent of the total, while debt accounted for 42 per cent. This shift points to investors betting on long-term value rather than chasing quick returns. The Mumbai Metropolitan Region (MMR) and Bengaluru continued to dominate, pulling in 57 per cent of all residential capital.
Slowdown In Residential Housing Demand
Housing sales data from PropEquity paints a slightly sobering picture. In Q2 2025, overall housing sales in the top nine Indian cities fell below 100,000 units for the first time in 14 quarters down 19 per cent YoY to 94,864 units. Supply also dropped 30 per cent to 82,027 units. Mumbai and Thane witnessed the steepest sales decline at 34 per cent each, while Delhi-NCR and Chennai were the only cities to post both supply and sales growth.
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"This is for the first time since Q3 2021 that housing sales have fallen below the 1 lakh unit mark," said Samir Jasuja, Founder and CEO, PropEquity. "Delhi-NCR has witnessed the maximum growth in this quarter owing to the rise in supply in Ghaziabad and Greater Noida."
Among the deals making headlines, Blackstone's entry into the residential space stood out with a $214 million move to acquire a 66 per cent stake in Kolte-Patil Developers. This marks a significant strategic pivot from the firm's usual commercial real estate plays, as per JLL.
"India's real estate sector remains a compelling investment destination, buoyed by both domestic and international confidence despite global economic uncertainties," said Lata Pillai, Senior Managing Director and Head of Capital Markets, India, JLL. "We anticipate that capital flows for calendar year 2025 will align with the established benchmarks."
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Mumbai, Bengaluru Top The Charts
Two cities, Mumbai Metropolitan Region (MMR) and Bengaluru, saw more than half (54 per cent) of the total investments. The residential sector also edged past office spaces, attracting 38 per cent of capital, as investor sentiment leans toward long-term end-user demand over traditional yield-driven strategies.
Owing to a cumulative 100-basis-point cut in the repo rate by the Reserve Bank of India since February, affordability has improved in 7 of 8 major Indian cities, according to Knight Frank India. Its Affordability Index, which tracks the EMI-to-income ratio for average households, now shows Mumbai falling below the critical 50 per cent threshold for the first time.
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"This is the first time in the history of the index that Mumbai has come below the threshold of the 50 per cent mark," Knight Frank noted. Mumbai's EMI-to-income ratio declined from 50 per cent in 2024 to 48 per cent in H1 2025.
On the affordability front, Ahmedabad ranked as the easiest market for buyers, with an EMI-to-income ratio of just 18 per cent, followed by Pune at 22 per cent and Kolkata at 23 per cent. NCR was the only major region where buying a home got tougher, as property prices jumped enough to wipe out the benefit of lower interest rates.
"Affordability plays a critical role in maintaining homebuyer demand and sustaining sales momentum," said Shishir Baijal, Chairman and Managing Director, Knight Frank India. "Given the RBI's healthy 6.5 per cent GDP growth estimate for FY 2026 and a favourable interest rate scenario, affordability levels are expected to be supportive of homebuyer demand in 2025."
