Real Estate Sector Drew Maximum AIF Investments In First Half Of FY25, Says Anarock Research

Real estate sector has emerged as the leading choice for alternative investment funds in India, according to a report released by Anarock Research on Monday.

The share of real estate in AIF investments stood at 17% or Rs 75,468 crore, out of the total Rs 4,49,384 crore invested across sectors till first half of fiscal 2025, the report said, citing the latest Securities and Exchange Board of India data.

Apart from real estate, sectors like information technology, financial services, non-banking financial companies, banks, pharmaceuticals, fast-moving consumer goods, retail, and renewable energy have also benefitted from significant AIF inflows.

"By the end of first half of fiscal 2025, total investments in the real estate sector via AIFs have risen from Rs 68,540 crore by fiscal 2024-end to Rs 75,468 crore. This is a significant 10% growth in just half the financial year," said Anuj Puri, chairman of Anarock Group.

AIF in India have seen substantial decadal increase in the number of funds available for investment. AIFs’ overall commitment rose by over 340% in the last six years – from Rs 2,82,148 crore in fiscal 2019 to Rs 12,43,083 crore in first half of fiscal 2025, reflecting increasing appetite for alternative investment strategies, Anarock said.

"A deep dive into the data reveals that the surge in AIF activity is largely driven by Category II AIFs, which include a mix of real estate funds, private equity, debt funds, and fund of funds," Puri said. "The data indicates that over the last five years, Category II AIFs have been responsible for nearly 80% of total AIF commitments, highlighting the dominance of these flexible and tailored investment vehicles."

Traditionally, domestic investors have been the primary source of AIF funding. However, foreign portfolio investors or FPIs are also stepping up, especially in the case of Category II AIFs. In this category, FPIs now have an almost equal participation alongside domestic investors, Anarock further noted.

A major trend within AIFs is the growing reliance on equity financing to bridge gaps in the real estate sector. With many real estate projects requiring significant working capital throughout their lifecycle, AIFs have provided a vital source of funding, according to Anarock.

These funds offer a customised capital stack that addresses the unique needs of real estate developers, helping to manage everything from construction to long-term project financing, it added.

In the first nine months of calendar year 2024, private equity investments in the real estate sector amounted to Rs 28,560 crore, Anarock said. Real estate captured 17% of total sectoral investments during this period, it noted.

"Additionally, Rs 12,801-crore were raised through qualified institutional placements or QIPs, ranking the sector second among major industries and maintaining a 17% overall share," it added.