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nstitutional investments in India's real estate sector surged to $1.80 billion in Q2 2025, a 122% increase from the previous quarter, according to Vestian's latest report. Foreign investors from the US, Japan, and Hong Kong led this growth, accounting for 89% of foreign inflows, primarily targeting commercial assets. Despite this impressive quarterly rise, total inflows were down 42% year-on-year from the highest-ever recorded in Q2 last year.

    Foreign investments contributed $1.19 billion, a 46% annual drop and a decline in their overall share from 71% in Q2 2024 to 66%. Vestian attributes this shift to foreign investors' more cautious outlook, favouring co-investment models over direct ownership to mitigate risk amid geopolitical tensions and economic uncertainty. Co-investments accounted for 15% of total institutional investments in Q2, nearly double the previous quarter's share.

    CEO Shrinivas Rao notes that while overall inflows were lower year-on-year, the substantial quarterly growth reflects renewed investor confidence driven by robust macroeconomic fundamentals and strong demand. He expects this momentum to continue into FY26, buoyed by projected GDP growth exceeding 6% and recent repo rate cuts lowering borrowing costs and improving credit availability.

    Commercial real estate attracted the majority of institutional capital in Q2, while residential properties accounted for just 11%. Domestic investors contributed only 19% of total inflows, down from 21% a year ago. The report attributes this pullback to global conflicts and trade disruptions impacting investor sentiment and risk appetite. Despite these challenges, Vestian sees scope for continued capital inflows if macroeconomic indicators remain stable and supportive policy measures continue.