Growth and development in the Indian real estate sector has for long been characterised by robust funding mechanisms. It is but for having relied on the support of traditional lenders like banks and Non-Banking Financial Companies (NBFCs), that real estate has evolved given the capital-intensive nature of the business. This evolution has brought us alternative financial models like Private Equity (PE), Real Estate Investment Trusts (REITs), and increased foreign direct investment (FDI). Their emergence in a changing landscape have added to the sectors resilience and adaptability by giving them access to diverse funding options.
Total inflows in the Indian real estate market touched USD 2.9 billion in the January–March 2025 quarter, marking a 74% year-on-year rise in equity investments. We have noted a strong participation from REITs and institutional investors that has ensured that developer activity benefitted. Major metropolitan regions like Mumbai, along with Delhi and Bangalore emerged as an attraction for equity investments garnering about 67% of total equity inflows during the quarter.
Developers in Mumbai have leveraged on these funding opportunities to solve the demand for office spaces and luxury residential projects. The reason that it has gained significant investor interest from institutional and foreign investors in particular is the attraction of higher returns on investment and faster absorption rates, along with long-term rental yield potential possibilities. The additional attraction of transparency and scalability associated with such asset classes fits well into the investment framework set by Private Equity firms and REITs pushing capital inflows into these projects.
Alternative funding models have introduced benefits as well as challenges to the sector. To list the positives, these models through diversity in the funding options have improved corporate governance, and enhanced project viability. REITs as an example attracted institutional investors and promoted professional management practices in the office market landscape. Besides such an investment pool financing through models such as crowdfunding platforms too are democratising access to real estate investments. It has done so by giving a platform to individuals who are looking to participate in high-value projects with lower capital needs.
For the Indian funding landscape this is a change that provides faster funding and a broader investor base while ensuring that investments more accessible, liquid, and diversified. While this may benefits developers and investors one might still have trouble navigating regulatory complexities and ensuring investor protection in these new models. Till this continues to be a work in progress, it is only prudent to have a careful oversight mechanism while policy frameworks evolve.
Data put out through various media reports shows that the real estate market in Mumbai had a significant year-on-year growth of 9% in the financial year 2024–2025. Reaching 143,948 properties, it demonstrated strong resilience. This growth came with a substantial increase in stamp duty collections, an indication of tailwinds for high-value properties transactions in the city. Q1 of 2025 also showed property registrations increasing by 22% compared to Q1 2024, and revenue from stamp duty collections rising by 27% year-on-year.
Funding without foreign capital too has been seen to have found its space in FY25. Foreign investors have been crucial, particularly in prime commercial and residential projects in cities like Mumbai, where domestic funding has had its niche. We have seen foreign investors being drawn to key Tier I markets, including Mumbai, where they have invested in development assets and land. Reports indicate a 3% decline in overall private equity investments to USD 3.7 billion in FY25, but foreign investors accounted for 84% of these inflows, indicating a strong comeback in foreign capital. Although an occasional instance of fund mobilisation being a challenge can’t be ignored, its growth potential and regulatory support have prepared the base for sustained foreign investment going forward. The first quarter of FY25 saw a notable surge in equity funding, with a 74% increase to approximately USD 2.9 billion, driven by strong demand and institutional investor interest.
The future with technology, sustainability, and innovative financing models make the sectors transformative growth story more interesting. As it becomes more accessible and efficient, the rise of smart homes, sustainable designs, and premium housing will continue to guide the market, driven by urbanisation and rising disposable incomes. As India’s economic landscape evolves, the real estate sector will play a pivotal role in contributing to the country’s GDP, with projections suggesting it could account for 13–15% by 2030 as it delivers upon the needs of residents and businesses alike.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
