India's real estate playbook shifts as domestic capital rises and foreign flows dip in H1 2025

India's real estate market is seeing an ongoing shift in the capital investment landscape, with domestic institutional investment rising while foreign investment recording a decline. Foreign institutional investments dropped 39% YoY in H1 2025 to $1.6 billion, as global investors remained cautious amidst the evolving macroeconomic scenario, credit flow, and inflationary pressures, dragging down the overall institutional investments in H1 2025 by 15%, according to the latest report by Colliers. Despite the slowdown, foreign capital still accounted for over half of total inflows, with growing interest in mixed-use and retail assets.

While foreign investments saw a decline, domestic capital surged by 53% to $1.4 billion, accounting for 48% of the total inflows in H1 2025. The data shows Indian institutional investors are playing a more prominent role in driving real estate activity across core asset classes.

After a steady start in the first quarter, institutional investments in Indian real estate witnessed a notable uptick during Q2 2025, at $1.7 billion, pushing total investments in H1 2025 to $3 billion, reinforcing the sector’s resilience amidst ongoing global uncertainties. "Although this marked a 15% decline compared to H1 2024, the investment volume remained above the half-yearly average of about USD 2.6 billion since 2021, reflecting sustained investor interest," says the report.

"Their (domestic investors') growing dominance has helped cushion the impact of global uncertainties and push total investments to the USD 3.0 billion mark. Over 60% of domestic investments during H1 2025 were directed towards residential and office assets, reflecting sustained confidence in core segments,” said Badal Yagnik, Chief Executive Officer, Colliers India.

He added that domestic capital is poised to bring greater stability and long-term confidence to India’s maturing real estate ecosystem.

Residential & Office Assets Top Choices

Residential assets saw $0.8 billion of investments, driving 27% of the inflows during H1 2025, followed by office assets, at a 24% share. Investments in mixed-use assets also witnessed a significant surge, accounting for more than 20% share in the total inflows during H1 2025, up from a 7% share during the corresponding period in 2024. Retail and alternative assets also saw a notable rise in investment inflows, cumulatively accounting for $0.5 billion, led by select large deals in H1 2025.

Vimal Nadar, National Director & Head of Research, Colliers India, says the residential segment continued its strong run, accounting for 31% of quarterly investments, driven by end-user demand, improved affordability, and renewed confidence from institutional investors. "The retail sector is also witnessing a steady revival, backed by rising consumption, rapid urbanisation, and evolving consumer lifestyle & spending patterns. With REITs and other institutional players actively scouting for quality retail assets across key markets, investment activity in this segment is expected to gain further traction in the coming quarters,” said Nadar.

Mumbai & Bengaluru Top Investment Inflows

Mumbai drove 22% of the total investments during H1 2025, led by select deals in office assets. Bengaluru attracted $0.5 billion in investments during H1 2025, contributing nearly 17% to the total inflows. Office and residential assets together made up 57% of the city’s investment share. Interestingly, a select large deal in the retail segment in Kolkata resulted in a 13% share of total investments by the city during H1 2025.