India’s real estate sector attracted $4.5 billion in institutional investments in the first half of 2026, growing 50% from the same period last year, according to a new report by Colliers India. This marks the strongest first-half performance the sector has recorded in six years.
The rise came at a time when the West Asia crisis created uncertainty in global trade and capital flows. The growth was led by office assets, rising domestic participation, and a recovery in foreign investment, reflecting sustained confidence among both domestic and foreign investors.
Q2 2026 sees a sharp jump
Much of the half-year surge came from a sharp growth in the April-June quarter. Real estate investments in Q2 2026 alone touched $2.9 billion, up 70% year-on-year, supported by both domestic and foreign investors.
The report attributes the strong growth to improving confidence among domestic investors, renewed foreign capital in select transactions, and increasing investment in mixed-use and alternative real estate assets.
Adding to the positive outlook, the International Monetary Fund (IMF) recently raised India’s GDP growth projection for FY2027 by 10 basis points to 6.5%, which is expected to further support investor confidence.
Domestic investors account for over half of total investments
Domestic investors led the investments in H1 2026, with total capital deployment rising 80% year-on-year to $2.60 billion. They accounted for 57% of all investments recorded during the first half, reflecting strong investor confidence in the long-term prospects of the Indian real estate market.
Foreign investments, meanwhile, saw a resurgence, particularly in the second quarter, driven by select large deals, taking foreign capital inflows to $1.90 billion during H1 2026, up 24% year-on-year. This growth was supported by strategic equity investments, stake acquisitions, and capital allocation across mixed-use and alternative assets.
Badal Yagnik, CEO and Managing Director, Colliers India, said institutional investment growth was led by equally strong participation from both domestic and foreign investors.
He added that domestic investors have consistently accounted for 40-60% of real estate investments in recent quarters, backed by their expanding presence across asset classes. Foreign investors, meanwhile, have become increasingly selective and are likely to further tap into alternative and mixed-use segments. This balanced interplay between the two investor groups, he said, will be crucial in the next growth phase of Indian real estate, especially amid ongoing uncertainty in capital deployment.
Office space remains the top choice for investment
The office segment remained the top destination for institutional capital. It drew around $1.90 billion in investment, accounting for over 40% of the total investments in H1. Most of this came from domestic investors buying into already-operational office buildings.
Investments in the residential segment, however, fell 43% year over year to $500 million in H1 2026. This shows that rising costs and slower home sales made investors more cautious.
Mixed-use developments and alternative assets such as data centers and warehousing were the biggest gainers, particularly in Q2. At approximately $800 million in investment each, the two segments accounted for nearly one-fifth of overall inflows during the half. This growth was largely led by foreign investors buying equity stakes as part of their efforts to diversify their portfolios. The hospitality sector also did well, with investments tripling year-on-year to $300 million, again led by foreign investors, though from a smaller base.
Chennai and Bengaluru emerge as the top investment markets
Among Tier I cities, Chennai and Bengaluru together saw $1.2 billion of real estate investments, accounting for 27% of all investments in H1 2026. Each city received close to $600 million, with office space accounting for 85-95% of investment in both cities.
Multi-city deals accounted for 46% of the total investments during the first half. Tier II and III cities like Coorg, Hosur, Coimbatore, Kochi and Ujjain also drew investor interest, mainly in hospitality, industrial and warehousing, and residential projects.
What this means for the real estate sector
This surge in institutional capital is a positive signal for the broader property market in India. More real estate investment typically means faster construction, better-quality projects, and stronger funding support for developers.
The strong investment in the office segment suggests businesses still need physical offices, even with hybrid work models. This is positive for commercial developers, particularly in cities like Chennai and Bengaluru, which could see more office supply in the coming months.
The drop in residential investment, on the other hand, suggests caution among investors, likely due to rising costs and slower home sales. This could lead to fewer new housing launches in the near term. Meanwhile, growing interest in mixed-use, data centers, warehousing and hospitality signals where the next opportunities may lie for developers and investors alike.
Overall, with domestic investors leading and foreign capital slowly returning, and with India’s economic growth outlook improving, the real estate sector looks set to remain an attractive investment destination through the rest of 2026, provided global uncertainties don’t escalate further.
