The decline was driven largely by a steep 75% drop in foreign investments to $400 million, while domestic investors contributed $1.2 billion, accounting for nearly three-fourths of total inflows.
The moderation in capital flows comes at a time when global uncertainty, rising costs and shifting investor preferences are beginning to reshape how money is deployed in the sector.
Foreign pullback: Cyclical, not structural
Market experts largely view the decline in overseas investments as a short-term reaction to global conditions rather than a shift away from India.
“The recent outflow of foreign capital looks more like a knee-jerk reaction than a structural concern,” said Binitha Dalal, Founder and Managing Partner, Mt K Kapital, adding that domestic capital remains strong enough to support the country’s growth trajectory.
Amrita Gupta, Director at Manglam Group, echoed this view, noting that the moderation is “more linked to short-term global uncertainty than any structural concern around India,” even as global investors become more selective in their allocations.
This selectivity is visible in a preference for high-quality, income-generating assets and developers with strong execution track records.
Domestic capital steps up
As foreign inflows recede, domestic capital is playing a larger role in sustaining investment activity.
Dalal said this shift is sustainable, supported by expanding retail participation, infrastructure spending and a stronger banking system. The growing role of structured investment vehicles such as REITs and AIFs is also deepening the domestic capital pool.
Pratyush Pandey, Founder of AARE Consulting (All About Real Estate), said the increasing role of domestic capital is reshaping the sector.
“Domestic investors—including family offices, HNIs, home-grown funds and REIT participants—are becoming increasingly active across the real estate spectrum. Their deeper understanding of local markets and long-term confidence in India’s growth story is creating a stable flow of capital,” he said.
Pratik Tibrewala, Head of Corporate Finance at M3M India, noted that domestic capital is filling the gap left by foreign investors.
“With equity markets seeing some moderation and outbound investments easing, a part of that capital is naturally getting redirected into Indian real estate,” he said, adding that the sector is now being driven more by internal fundamentals than global sentiment.
A white paper by Client Associates further underlines this shift.
It highlights that Indian households contribute nearly 60% of domestic savings, with real estate now accounting for close to 70% of household savings. This growing participation is turning households into a key source of long-term capital for the sector.
Office segment correction, not demand collapse
The office segment, which saw investments fall sharply to $821.1 million from over $3 billion in the previous quarter, is undergoing a phase of recalibration.
Experts say this reflects cautious capital deployment rather than weakening demand.
“The decline in office investments suggests asset stabilisation rather than weak demand,” Dalal said, pointing to continued strength in leasing activity and rental trends.
Amrita Gupta added that in segments such as office real estate, the current phase “looks more like cautious decision-making than weakening demand.”
Global factors pushing up costs
Beyond capital flows, global developments are also influencing the sector through rising costs.
According to experts, higher crude oil prices linked to geopolitical tensions are pushing up logistics expenses and key construction inputs such as steel and cement, with some markets seeing cost increases of over 12%.
Vijay Ram Rattan, Chairman, Ram Rattan Group, said these pressures are not new but are being handled better this time.
“Developers are operating with tighter cost controls, more structured procurement and sharper execution, which is helping absorb these pressures without materially affecting project timelines,” he said.
Shrivallabh Goyal, CEO and WTD at Reliance Model Economic Township, also highlighted oil-driven supply chain disruptions as a factor, noting that they are pushing developers towards more disciplined execution and resilient project planning.
Demand holds, market evolves
Despite the moderation in investments, underlying demand remains stable. Residential demand continues to be supported by infrastructure and connectivity improvements, while office leasing activity has held up.
Large infrastructure projects such as the Noida International Airport are expected to attract fresh interest from both investors and end-users, supporting demand in surrounding regions.
At the same time, investor behaviour is changing.
There is a shift towards completed assets and organised platforms, rather than speculative land-led investments.
Ankush Kaul, President – Sales, Marketing & CRM at Central Park, noted that India continues to remain a key destination for capital, particularly from non-resident Indians, with investments having crossed $14 billion in 2025.
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