Indian real estate isn’t just booming — the wiring of capital, REITs, and regulation have transformed illiquid assets into liquid investments
For decades, the sector was a swamp. Towers rose halfway and then froze, transactions thrived in cash, and buyers were left with skeleton structures. Banks and NBFCs carried the burden of bad loans, while developers relied on pre-sales just to keep the lights on.
Real estate has always been big in India. In fact, it has long been an emotional decision for most people, rarely viewed as a financial transaction. This aversion was reinforced by the fact that, fundamentally, it was an illiquid asset. You could buy it — but could never really exit it.
The change wasn’t about pouring more cement. It was about wiring the money. And that wiring rests on three pillars: engineering, regulation, and special situations. Together, they have transformed real estate from a locked asset into a liquid market — drawing more investors to the sector in search of returns.
REITs were the first real unlock. Before 2019, a commercial tower in Bengaluru or Gurugram was a deadweight asset on a developer’s balance sheet. Today, through Embassy Office Parks REIT, Mindspace, and Brookfield India REIT, those same towers are globally recognisable securities. Embassy REIT alone raised over ₹4,750 crore in its IPO, while Blackstone’s $833 million partial exit in 2023 showed the playbook: package the rent roll, list it, and exit at global valuations. Interestingly, the upcoming Knowledge Park REIT IPO is not structured as a Blackstone exit. Instead, the proceeds are being channelled towards repayment and prepayment of indebtedness, rather than a developer’s exit.
That shift signals conviction: Rather than merely harvesting gains, global sponsors are willing to stay invested longer and use the REIT market as a refinancing tool. In a sector once plagued by leverage, using public capital to clean up balance sheets reflects both discipline and confidence in India’s real estate cycle. These REITs have delivered 10–15% annualised returns, with yields compressing by 150 basis points since 2010. That’s not just rental income — that’s capital gains born from liquidity.
Regulation provided the credibility dividend. RERA forced developers to ringfence funds and deliver the projects undertaken. GST streamlined a previously fragmented sector. 100% FDI under the automatic route opened the gates. And the advent of SM-REITs now promises to democratise real estate investments further, pulling in domestic retail capital alongside institutional flows. Without this scaffolding, no foreign investor would have risked serious money.
Special situations complete the trifecta. According to reports, India still carries a backlog of homes worth ₹10 lakh crore as of September 2025. What once symbolised despair has become an arbitrage playground. Funds like Oaktree, PAG, and Varde have poured close to $3 billion into Indian real estate over the past few years, buying distressed projects at discounts, completing them, and exiting structured.
The Insolvency and Bankruptcy Code has accelerated this trend, with over a thousand resolutions yielding ₹3.55 lakh crore in recoveries. Patient capital thrives where domestic balance sheets run out of breath.
The effect is visible in the flows. In 2024, private equity real estate investments touched $8.9 billion, with foreign players contributing nearly half. Blackstone alone has already deployed over $50 billion in Indian real estate, with a $100 billion cheque reportedly lined up. JLL estimates that since 2021, foreign investors have contributed to around two-thirds of the capital flowing into real estate.
However, it is not just the deployment that stands out—the real story lies in the exits. Liquidity, once absent, has now become the engine—and at a pace that was unthinkable a decade ago. For investors, exits are oxygen. They allow capital rotation as investors seek newer opportunities within real estate to capture value.
A Colliers India report from January 2025 found that the share of investments in office spaces dropped from 61% to 35%, while industrial and warehousing surged from 15% to 28%. Global investors are now positioning around consumption and supply-chain diversification themes. India’s $1.5 trillion National Infrastructure Pipeline and the Gati Shakti plan are the catalysts for monetising investments in land and industrial parks.
Who benefits from this improved liquidity? Retail investors now have access to institutional-grade real estate through REITs — once the preserve of developers and promoters. REITs are mandated to distribute 90% of their income. Lenders, especially stressed NBFCs, gain repayment channels as stalled projects find new sponsors. Developers recycle capital faster, shifting from balance sheet-heavy models to asset-light partnerships. Their local expertise brings execution capability, while global funds bring governance. It improves developer's ability to re-partner rather than remain stuck with projects. Even homebuyers benefit as long-abandoned projects find a path to completion. And finally, the government gains both growth optics and deeper capital markets — strengthening India’s credibility as not just a market to enter, but a market one can also exit.
Which brings us back to the provocation: India’s real estate isn’t just booming. The skyscrapers were always there. What changed is the plumbing. The wiring of capital has been rewritten. Foreign investors didn’t just bring money — they brought the structures that made Indian real estate globally legible. They have turned a locked, promoter-driven asset class into a liquid, yield-bearing security. And all stakeholders—retail investors, lenders, developers, homebuyers, and the government—are riding the liquidity wave. Policymakers now need to ensure this momentum is maintained.
No VCCircle journalist was involved in the creation/production of this content.
