Global Giants USA, Japan & Hong Kong Inject $1.06 Bn into Indian Real Estate, Driving 89% of Q2 2025 Foreign Inflows

Indian real estate sector received institutional investments of USD 1.80 Bn in Q2 2025, registering a 42 percent yearly decline from the highest-ever investments recorded in any quarter. However, investments more than doubled, recording a sharp 122 percent growth over the previous quarter.

While foreign investments dominated investment activities in Q2 2025, the share declined from 71 percent in Q2 2024 to 66 percent in Q2 2025. In terms of value, foreign investments dropped by 46 percent to USD 1.19 Bn from USD 2.21 Bn. On the other hand, the share of co-investments almost doubled to 15 percent from 8 percent, registering a marginal hike of 2 percent in terms of value.

The shift from direct investments to co-investments by foreign investors' underscores their cautious approach, driven by a desire to mitigate risks amidst uncertain demand due to geopolitical conflicts and macroeconomic instability.

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Amid global headwinds, investors from the USA, Japan, and Hong Kong contributed around 89 percent to the foreign investments recorded in Q2 2025. The share remained largely stable compared to the same period a year earlier. Interestingly, majority of the investments from these countries, around 69 percent, were concentrated in commercial assets. Residential properties received only 11 percent of the total investments, whereas the rest were diverted towards diversified properties.

Domestic investors accounted for 19 percent of the total investments in Q2 2025, down from 21 percent in the same period last year. In value terms, domestic investments stood at USD 336 Mn, marking a 47 percent annual decline and a 28 percent drop compared to the previous quarter. The decline reflects cautious sentiment among domestic players amid market uncertainty due to geopolitical conflicts and trade tariffs.

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Shrinivas Rao, FRICS, CEO, Vestian said, “Institutional investments saw a strong recovery in Q2 2025, primarily fueled by a sharp resurgence in commercial real estate activity compared to the previous quarter. While overall inflows remained lower on an annual basis, the substantial quarterly growth reflects renewed investor confidence supported by robust macroeconomic fundamentals and strong inherent demand. This growth momentum is expected to continue as several rating agencies predict economic growth of more than 6 percent during FY 2026. Moreover, the recent reduction in the repo rate is expected to bolster positive sentiment by reducing borrowing costs and improving credit access for the sector.”