Real estate leads AIF investments in India, claims 15% share with net inflows of ₹73,903 cr

The real estate sector accounted for the largest share (15%) of cumulative net Alternative Investment Funds (AIF) investments during the first nine months of the financial year (9M FY25), with ₹73,903 crore invested into the second of total investment worth ₹5,06,196 crore, real estate consultancy ANAROCK in its AIFs Research Report 2025 says.

By the end of 9M FY25, AIF investments in real estate rose from ₹68,540 crore by FY 2024-end to ₹73,903 crore, an appreciable 8% growth in the first three quarters of fiscal year 2025.

The report highlights that the rise of AIFs has transformed real estate financing in India, offering a lifeline to projects struggling with a lack of funding and unlocking new opportunities for developers.

After real estate, IT/ITeS is a distant second with total AIF investment worth ₹30,279 crore flowing into the sector. Other sectors benefiting from AIF investments include financial services, NBFCs, banks, pharma, FMCG, retail, renewable energy, and others.

Prashant Thakur, Regional Director & Head – Research, ANAROCK Group, says amid increasing constraints on traditional funding sources, AIFs are an agile and innovative financing mechanism to address capital gaps. “Going forward, the adoption of blended finance models, AI-driven risk assessments, and streamlined regulatory frameworks maximize the impact of AIFs further.”

The number of AIFs active in the market has grown 36-fold over the past decade -- from 42 by 31st March 2013 to 1,524 AIFs as of 5th March 2025, with commitment raised increasing fivefold since 2019. Between FY2013 and FY2025, the commitment raised in AIFs has seen an 83.4% CAGR.

This surge in commitments is mainly fuelled by Category II AIF, which is contributing 80% over the last five fiscal years. The report highlights that domestic investors continue to hold the majority share in AIF fundraising activities; however, Category II AIFs exhibit a notable balance with foreign portfolio investors (FPIs) having an almost equal participation, the report says.

AIFs -- privately pooled funds that invest in non-traditional assets like private equity, hedge funds, and real estate -- offer niche, high-risk, high-reward opportunities suited for experienced investors.

The Centre's SWAMIH Fund, India's flagship AIF, has helped revive numerous stalled projects with liquidity infusions of over ₹35,000 crore to date, says Anuj Puri, Chairman, ANAROCK. “By facilitating the completion of many thousands of housing units, SWAMIH Fund has been an unmitigated boon for homebuyers across the country and helped bring considerable stability to the real estate market. That said, the SWAMIH Fund fights a constant uphill battle against various impediments.”

The report highlights that though substantial, the ₹15,000 crore corpus through SWAMIH II is not enough to revive India’s close to 2,000 stalled projects. “Regulatory hurdles, including insolvency cases under NCLT, further complicate the project's revival process. Existing lenders often resist ceding the first charge on stressed assets, delaying financing. Approval bottlenecks, such as expired RERA registrations and environmental clearances, add to implementation delays. Homebuyer litigations and withheld payments due to past delays create cash flow constraints, making execution more complex,” says the report.

The industry stakeholders say it is a welcome development, particularly for emerging brands bringing fresh ideas to the market. "AIFs offer the patient, strategic capital needed to back differentiated concepts that focus on design, sustainability, and luxury. This shift also reflects investors’ confidence in new-age developers who are reimagining the future of real estate through thoughtful execution and innovation," says Renu Singh, Director - Sales & Marketing, Aarize Group.