NEW DELHI: Despite the Indian real estate sector reporting a strong overall performance in institutional investments—reaching a four-year high for a third quarter—the market has been defined by a dramatic retreat of global capital. According to a new report by Vestian, foreign investment in Indian real estate crashed to a yearly low of just 8 percent of the total institutional inflows in the third quarter of 2025 (Q3 2025), a sharp indicator of persistent global economic uncertainty.
The value of foreign investments plummeted to $141 million, marking a staggering 88 percent decline compared to the previous quarter (Q2 2025) and a 68 percent annual decline compared to Q3 2024. This flight of capital occurred even as the sector as a whole attracted $1.76 Billion in Q3 2025, an 83 percent jump year-on-year.
Domestic and co-investments propel market
The domestic investment community and strategic co-investments were critical in mitigating the foreign outflow and driving the overall positive figures.
The share of India-dedicated investments surged to a significant high of 51 percent ($892.22 million), marking a robust 166 percent quarterly increase and a 115 percent annual increase in value.
Foreign investors who chose to remain in the market favoured collaboration, boosting the share of co-investments (joint funding by foreign and domestic investors) to 41 percent ($726.58 million) from just 15 percent in Q2 2025.
Shrinivas Rao, FRICS, CEO, Vestian, commented on the trend: "While foreign investors adopt a cautious approach [due to global headwinds], the significant rise in the share of domestic investments and co-investments underscores the growing confidence of domestic investors in India’s growth story."
Commercial assets remain the favourite
The dominant asset class for the capital that did flow in was the commercial sector, which accounted for a massive 79 percent share of total investments, surging to nearly $1.4 billion. This segment registered a strong 104 percent annual growth.
In contrast, the residential sector's share dropped to just 11% ($192 million), reflecting a sharp 49 percent quarterly decline, while the industrial and warehousing sector, though small at 5 percent share, saw a 168 percent quarterly surge due to growing logistics demand.