India’s real estate PE inflows fall 23% to $1.13 billion in H1 2026 as global rates bite; office assets corner 89% of investments: Knight Frank India

Private equity (PE) investments in India’s real estate sector declined 23% year-on-year (YoY) to $1.13 billion in the first half of 2026 as higher global interest rates and tighter financial conditions prompted investors to become more selective in deploying capital. Despite the slowdown, the office segment continued to dominate investment activity, accounting for 89% of total inflows, according to Knight Frank India’s latest capital markets report.

The report shows that investments fell from $1.47 billion in H1 2025 to $1.13 billion during the January-June 2026 period. However, the consultancy said the moderation reflects a shift in global capital allocation rather than weakening fundamentals in India’s real estate market, with investors placing greater emphasis on risk-adjusted returns, liquidity and execution certainty.

Office assets remain investors’ top choice

Office real estate attracted $998 million in investments during H1 2026, registering a 33% YoY increase and accounting for nearly nine out of every 10 dollars invested in Indian real estate. The segment continues to benefit from sustained demand from Global Capability Centres (GCCs), multinational corporations and domestic occupiers, reinforcing India’s position as a preferred office investment destination.

Investor preference also shifted decisively towards completed office assets. Around 75% of office investments were directed towards ready assets, up from 53% a year ago, reflecting the growing preference for stable rental income and lower execution risk in an environment of elevated financing costs and higher return expectations.

Among cities, the National Capital Region (NCR) emerged as the biggest beneficiary of private equity capital, attracting $411.1 million, a sharp 522% YoY increase that accounted for more than one-third of all investments during the period. Pune followed with $355.9 million, while Chennai ($154.7 million), Bengaluru ($115.9 million) and Mumbai ($84.3 million) also featured among the leading destinations.

Global rates reshape investment strategy

Knight Frank India attributed the moderation in investment activity largely to changes in the global capital environment. As US Treasury yields climbed from around 1.8% in 2021 to 4.4% in H1 2026, the implied return threshold for investing in India rose from 8.6% to nearly 11.5%, making investors more cautious about project risks and execution.

Shishir Baijal, chairman and managing director of Knight Frank India, said the decline in investment volumes should not be interpreted as a deterioration in India’s real estate fundamentals. He noted that while higher global borrowing costs have narrowed the yield advantage enjoyed by emerging markets, India’s office market continues to demonstrate resilience, supported by sustained GCC expansion, robust occupier demand and a growing pipeline of institutional-grade assets.

According to Baijal, attracting larger pools of global capital will increasingly depend on creating a more competitive investment framework alongside strong market fundamentals.