Commercial Real Estate Drives Real Estate Sector Amidst Slowdown, Says Grant Thornton

Mumbai, July 15, 2025: India’s property market experienced a notable sequential slowdown in the second quarter of 2025, with the total number of real estate deals declining by 54% and deal value dropping 35% to $775 million. Despite this overall contraction, the commercial real estate sector emerged as the primary driver of transaction value, according to a report by Grant Thornton Bharat.

Commercial Sector Leads Deal Value

The commercial real estate segment was the cornerstone of deal activity in Q2 2025. It accounted for $480 million across five transactions, representing a dominant 62% of the total transaction value, despite making up only 38% of the total deal volume.

Following commercial real estate, residential development and real estate technology segments contributed 23% and 15% to the total deal volumes, respectively. However, their contribution to the overall deal value remained limited, at 10% and 5% respectively. This highlights a clear preference among investors for income-generating commercial assets during this period.

Private Equity Remains Active

Private equity (PE) investors continued to play a significant role in the Indian real estate market, injecting a total of $580 million across seven deals. The largest and most prominent transaction was Blackstone’s acquisition of South City Mall in Kolkata for $378 million. This acquisition by Blackstone, already a major owner of commercial and retail real estate in India, underscores continued institutional appetite for quality retail assets.

Other notable PE transactions during the quarter included:

• Prime Offices Fund investing $87 million in Prius Platinum, South Delhi.
• IFC is investing $50 million in Birla Estates.
• Lighthouse Funds is backing Knest Manufacturers with $35 million.
• Arnya Realestates Fund investing $15 million in Uniqus.

M&A and Capital Market Activity

Mergers and acquisitions (M&A) in the real estate sector amounted to six deals, valued at $195 million. This represented a 42% increase in value compared to the previous quarter, even though the volume of M&A deals saw a 45% sequential drop.

Meanwhile, capital market activity exhibited signs of revival, indicating a cautious return of investor confidence in real estate-backed listings. Two Initial Public Offerings (IPOs) collectively raised $243 million, and two Qualified Institutional Placements (QIPs) raised $245 million. This turnaround from the inactivity of Q1 2025 points towards a gradual re-engagement with listed instruments.

Institutional Interest Rebounds

The Grant Thornton Bharat report also underscored a renewed confidence among institutional investors. Major global players such as Mitsubishi, Sumitomo, Hines, and HDFC were noted for backing large-scale, formal real estate platforms. This trend signifies growing momentum across various real estate models, including residential, REIT-grade commercial, and tech-led real estate, particularly in metro and tier-2 cities. This shift suggests a strategic move towards more organised and scalable real estate ventures.

For the April–June 2025 quarter, while broader macroeconomic challenges exerted pressure on overall transaction volumes, commercial assets and private equity investments served as key anchors, stabilising India’s real estate market activity.

What’s Ahead?

Going forward, India’s commercial real estate segment is likely to remain the focal point for investors, driven by demand for income-generating assets and strong institutional interest. While overall transaction volumes may stay muted due to global macroeconomic uncertainty, premium office spaces, retail malls, and REIT-backed platforms are expected to attract continued private equity inflows. Additionally, with IPO and QIP activity showing early signs of revival, capital markets may become a more prominent funding route for real estate firms. The outlook remains cautiously optimistic, with formalisation, tech adoption, and Tier-2 city expansion being key growth drivers in H2 2025.

Disclaimer:  At HDFC SKY, we take utmost care and due diligence in curating and presenting news and market-related content. However, inadvertent errors or omissions may occasionally occur.

If you have any concerns, questions, or wish to point out any discrepancies in our content, please feel free to write to us at content@hdfcsec.com.

Please note that the information shared is intended solely for informational purposes and does not make any investment recommendations