|
The office sector emerged as the strongest-performing asset class during the first half of 2026, accounting for nearly 89 per cent of all private equity investments in Indian real estate. Investments in this segment rose by 33 per cent to USD 998 million, compared with USD 579 million during the first half of 2025.
According to the latest Knight Frank India report, titled 'Trends in Private Equity Investment in India: H1 2026', total private equity investments in Indian real estate stood at USD 1.13 billion during the first half of 2026. This figure marks a 23 per cent year-on-year decline from the USD 1.47 billion recorded in the same period last year. The office sector remained the preferred asset class, while the residential sector received the remaining investment. The National Capital Region (NCR) recorded the highest private equity investment in the office sector among major Indian cities at USD 363.8 million. Pune followed closely with USD 308.8 million. Chennai and Bangalore secured moderate investment levels, bringing in USD 154.7 million and USD 115.9 million, respectively, while Mumbai recorded the lowest amount at USD 54.6 million. Altogether, the total private equity investment across these major Indian cities in the office sector culminates in USD 997.8 million. The report noted that the office sector continues to benefit from robust occupier demand led by Global Capability Centres (GCCs), multinational corporations, and domestic enterprises. India's large skilled workforce, cost competitiveness, and increasing strategic relevance in global corporate operations support this leasing momentum across major office markets. Investor preference shifted overwhelmingly toward ready office assets during the first half of 2026. Completed properties accounted for approximately 75 per cent of total office investments, up from 53 per cent in the first half of 2025. This sharp increase underscores an ongoing shift in global capital allocation strategies amid higher interest rates and elevated hurdle rates. As the yield advantage historically enjoyed by emerging markets narrows, investors prioritize assets capable of generating immediate and predictable cash flows. Ready assets offer greater income visibility, lower execution risk, and faster capital deployment. Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India, said, "The moderation in private equity investments during H1 2026 is largely a reflection of the evolving global capital environment rather than any deterioration in India's real estate fundamentals." "Over the past few years, investors have witnessed a sharp rise in global borrowing costs, reducing the yield advantage that emerging markets traditionally enjoyed. Consequently, capital allocation decisions are increasingly influenced by factors such as execution certainty, taxation, liquidity and realised returns," Baijal added. The moderation in investment activity reflects more selective capital deployment amid elevated global interest rates, tighter financial conditions, and heightened geopolitical uncertainty. However, the report underscored that this decline does not signal any weakening of India's real estate fundamentals. Rather, it points to an evolving global investment landscape, where institutional investors prioritize risk-adjusted returns, liquidity, and execution certainty over growth potential alone. "Despite these challenges, India's office market continues to demonstrate remarkable resilience, supported by sustained GCC expansion, strong occupier demand and an increasing stock of institutional-grade assets," Baijal said. He further noted, "Looking ahead, India's long-term growth story remains compelling, but attracting larger pools of global capital will increasingly depend on creating a competitive investment framework that complements strong market fundamentals." (ANI)
|
