India’s real estate sector witnessed a marked revival in financial year 2024–25 (FY25), with total capital raised and number of transactions increasing sharply year-on-year, according to a report published by investment banking and advisory firm Equirus Capital. This recovery comes after a subdued FY24 and reflects renewed investor engagement across asset classes, especially Real Estate Investment Trusts (REITs), which outperformed the benchmark Sensex during the same period.
The report outlines that total capital mobilized by real estate companies in FY25 stood at ₹3,28,526 million, representing a more than threefold increase from ₹1,09,554 million recorded in FY24. Simultaneously, the number of significant real estate-related transactions grew from just 5 in FY24 to 17 in FY25, signaling a notable rebound in both equity and debt-based fund flows into the sector.
Breakdown by Market Segment
The growth in fundraising activity was not uniform across the sector. The largest share of capital raised came from large-cap real estate companies, which together mobilized ₹3,93,898 million, largely through qualified institutional placements, rights issues, and structured debt.
REITs accounted for the second-largest component, raising ₹3,12,012 million. These investment vehicles, which pool income-generating commercial real estate assets and offer regular dividend distributions, continued to attract interest from both institutional and retail investors.
In contrast, small-cap and mid-cap real estate firms raised ₹66,938 million and ₹52,626 million respectively. While the quantum was lower compared to large developers and REITs, the report notes that small and mid-cap companies benefited from regionally focused investor participation, particularly in high-demand housing markets and industrial corridors.
REITs Deliver Strong Returns Amid Broader Market Pressure
Among the listed real estate instruments, REITs emerged as the top performers in FY25. According to the Equirus Capital report, REITs delivered a 17.9% return in the 12 months ending June 23, 2025. This is significantly higher than the 6.1% return posted by the Sensex during the same period, and stands in contrast to the negative returns recorded by large-cap, mid-cap, and small-cap listed developers.
REITs offered a relatively stable investment option amid ongoing market volatility, supported by consistent rental income, lower leverage ratios, and access to diversified office assets. The report observes that income stability and transparency have led many investors to treat REITs as a hybrid between fixed-income and equity instruments, increasing their weightage in real estate portfolios.
Long-Term Performance of Small-Cap Segment
While REITs dominated in FY25 returns, the report points out that the small-cap segment has outperformed over a longer time horizon. Since March 2021, small-cap real estate companies have delivered stronger cumulative returns than larger players, REITs, or benchmark indices such as the Sensex.
Equirus attributes this outperformance to a combination of factors, including focused regional strategies, faster project turnaround, and flexibility in adapting to shifting demand trends. Several small-cap firms were early movers in emerging housing micro-markets and managed to leverage localized demand effectively.
Mid-cap developers also registered meaningful growth over the four-year period. Although their performance was muted in FY25, the report suggests that they remain well positioned to benefit from capital inflows as investors diversify away from large developers and towards execution-focused mid-sized players.
The significant increase in both capital raised and transactions reflects a higher level of institutional engagement in Indian real estate, despite persistent global macroeconomic risks, inflation concerns, and interest rate fluctuations. The report suggests that these funds are likely to be directed towards new housing launches, commercial office development, logistics parks, and balance sheet strengthening.
Equirus Capital highlights that developers are increasingly turning to structured financing and platform-level partnerships to manage risks while scaling up. The rise in deal activity may also lead to consolidation, particularly in metro and peri-urban regions where stalled or delayed projects remain under distress.
The report also notes an emerging trend in financing innovation, including capital recycling through asset monetization, formation of sector-specific Alternate Investment Funds (AIFs), and use of structured credit instruments.
The real estate sector is expected to remain active in capital markets, supported by ongoing urban expansion, policy interventions in affordable housing, and infrastructure-led growth. The report underlines that Tier 1 and Tier 2 cities continue to attract demand, particularly in residential and Grade A warehousing segments.
However, the outlook will depend on execution capabilities, policy stability, and the interest rate environment. While REITs are projected to maintain stable yield profiles, performance in the mid- and small-cap segments may vary depending on project-specific factors and geographic exposure.
