Key Takeaways
- • Real estate–focused alternative investment funds committed $14.5 billion between 2021 and 2025, but deployed only $5.7 billion, leaving $2.3 billion as dry powder while occupier demand substantially outpaces supply creation across Indian markets.
- • Office assets command institutional preference with capitalization rates of 7.25–7.75 percent, marginally above India's 10-year government bond yield of 6.6 percent, offering stable income visibility but insufficient deployment velocity.
- • Even full deployment of available $2.3 billion in dry powder to office development would create only 12.2 million square feet of new supply, meeting approximately 14 percent of India's annual office demand of 86.4 million square feet recorded in 2025.
- • The widening gap between occupier demand and institutional capital availability signals a compelling but underserved investment opportunity for domestic and global capital seeking exposure to India's real estate sector.
- • Capital commitments ($14.5 billion) significantly exceed actual capital raised ($7.9 billion), indicating execution challenges or shifting investment priorities among institutional funds focused on Indian real estate.
Summary
India's real estate market is experiencing a structural supply-demand imbalance, with strong occupier demand increasingly outpacing institutional capital deployment despite substantial capital availability, according to a report from Knight Frank India released May 26. Real estate–focused alternative investment funds recorded $14.5 billion in capital commitments between 2021 and 2025, yet only $7.9 billion has been raised and just $5.7 billion deployed, leaving an estimated $2.3 billion in dry powder. This execution gap—where commitments exceed actual fundraising by approximately 46 percent—underscores structural challenges in converting capital pledges into deployed investments that could address supply shortages.
The deployment deficit is particularly acute given India's scale of real estate demand. If the entire $2.3 billion of available dry powder were deployed exclusively to office development, it would create approximately 12.2 million square feet of new supply, representing only 14 percent of India's annual office demand of 86.4 million square feet as recorded in 2025. This shortfall reveals the magnitude of capital required to sustainably bridge India's real estate supply gap and suggests that current institutional deployment rates remain insufficient to support adequate supply creation across the market.
Office assets remain the most favored institutional investment segment, supported by stable income visibility and capitalization rates ranging from 7.25 to 7.75 percent—marginally above India's 10-year government bond yield of approximately 6.6 percent. This yield premium provides institutional investors with risk-adjusted returns, yet capital continues to flow at insufficient volumes. Across major asset classes, capitalization rates range between 2.60 and 7.75 percent, reflecting varying risk profiles and income stability characteristics that influence allocation decisions.
The widening gap between occupier demand and capital availability presents what Knight Frank characterizes as "one of the most compelling real estate investment opportunities globally." The funding data indicates substantial opportunity for both domestic and global capital to deploy capital into Indian real estate, provided institutional investors can accelerate deployment velocity and overcome execution bottlenecks currently evident in the commitment-to-deployment pipeline.
The deployment deficit is particularly acute given India's scale of real estate demand. If the entire $2.3 billion of available dry powder were deployed exclusively to office development, it would create approximately 12.2 million square feet of new supply, representing only 14 percent of India's annual office demand of 86.4 million square feet as recorded in 2025. This shortfall reveals the magnitude of capital required to sustainably bridge India's real estate supply gap and suggests that current institutional deployment rates remain insufficient to support adequate supply creation across the market.
Office assets remain the most favored institutional investment segment, supported by stable income visibility and capitalization rates ranging from 7.25 to 7.75 percent—marginally above India's 10-year government bond yield of approximately 6.6 percent. This yield premium provides institutional investors with risk-adjusted returns, yet capital continues to flow at insufficient volumes. Across major asset classes, capitalization rates range between 2.60 and 7.75 percent, reflecting varying risk profiles and income stability characteristics that influence allocation decisions.
The widening gap between occupier demand and capital availability presents what Knight Frank characterizes as "one of the most compelling real estate investment opportunities globally." The funding data indicates substantial opportunity for both domestic and global capital to deploy capital into Indian real estate, provided institutional investors can accelerate deployment velocity and overcome execution bottlenecks currently evident in the commitment-to-deployment pipeline.
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