In view of  growing global uncertainties,  institutional investments in real estate  registered a 42% yearly decline to USD 1.80 billion in Q2 2025 from the highest-ever investments recorded in any quarter. However, investments more than doubled, recording a sharp 122% growth over the previous quarter.

According to a latest report by Vestian, while foreign investments dominated investment activities in Q2 2025, the share declined from 71% in Q2 2024 to 66% in Q2 2025. In terms of value, foreign investments dropped by 46% to USD 1.19 billion from USD 2.21 billion. On the other hand, the share of co-investments almost doubled to 15% from 8%, registering a marginal hike of 2% in terms of value. The shift from direct investments to co-investments by foreign investors’ underscores their cautious approach, driven by a desire to mitigate risks amidst uncertain demand due to geopolitical conflicts and macroeconomic instability.

Amid global headwinds, investors from the USA, Japan, and Hong Kong contributed around 89% to the foreign investments recorded in Q2 2025. The share remained largely stable compared to the same period a year earlier. Interestingly, majority of the investments from these countries, around 69%, were concentrated in commercial assets. Residential properties received only 11% of the total investments, whereas the rest were diverted towards diversified properties.

Note: Foreign investments made through a joint venture between multiple countries were also included for the analysis, as a clear bifurcation of investment amounts was not available.

Source: Vestian Research

Domestic investors accounted for 19% of the total investments in Q2 2025, down from 21% in the same period last year. In value terms, domestic investments stood at USD 336 million, marking a 47% annual decline and a 28% drop compared to the previous quarter. The decline reflects cautious sentiment among domestic players amid market uncertainty due to geopolitical conflicts and trade tariffs.

Source: Vestian Research

Note: Commercial assets include office, retail, co-working, and hospitality projects.

Source: Vestian Research

Shrinivas Rao, FRICS, CEO, Vestian said, “Institutional investments saw a strong recovery in Q2 2025, primarily fueled by a sharp resurgence in commercial real estate activity compared to the previous quarter. While overall inflows remained lower on an annual basis, the substantial quarterly growth reflects renewed investor confidence supported by robust macroeconomic fundamentals and strong inherent demand. This growth momentum is expected to continue as several rating agencies predict economic growth of more than 6% during FY 2026. Moreover, the recent reduction in the repo rate is expected to bolster positive sentiment by reducing borrowing costs and improving credit access for the sector”, says Shrinivas Rao, CEO, Vestian.