India's realty investment hits Rs 57,917 crore, but affordable housing lags

India’s real estate sector is attracting record investment, but ensuring that capital reaches affordable housing, smaller developers and emerging cities remains a key challenge, according to the October 2026 report, The Changing Landscape of Real Estate Investment in India, by the Federation of Indian Chambers of Commerce and Industry (FICCI) and ANAROCK.

The report identifies a structural mismatch between investment flows and the sector’s wider requirements, even as private equity (PE) investment reached USD 6.1 billion (Rs 1,470 crore) across 55 deals between January and September 2026, approaching the USD 6.9 billion (Rs 5,512.40 crore) recorded during the whole of 2025.

The challenges extend beyond financing. Affordable housing is losing share in new supply, data centre expansion is constrained by power availability, investment remains concentrated in major metropolitan markets, and developers face difficulties securing capital during the early stages of projects.

The report argues that the next phase of growth will depend on deeper domestic capital markets, improved project execution and a broader geographical distribution of investment.

Early-stage financing remains the biggest hurdle

The availability of capital varies significantly across the real estate development cycle, with funding particularly difficult to secure before construction begins.

“The hardest money to find is the earliest,” the report states, highlighting how banks generally lend against approved projects that are already under construction.

As a result, land acquisition, regulatory approvals and pre-development expenses must often be financed through promoter equity, private equity, alternative investment funds (AIFs) or non-banking financial company credit, which can carry higher costs.

Also Read: Real estate deals slump 69 pc: What it means for homebuyers and investors

The report also notes that the requirement under the Real Estate (Regulation and Development) Act, 2016, to maintain 70% of buyer collections in a dedicated project account protects homebuyers but restricts developers from using those funds to finance subsequent land acquisitions.

This creates a financing gap between acquiring land and reaching the stage at which conventional construction loans become available.

To address this, ANAROCK expects platform equity, structured private credit and lease-backed financing to become increasingly important. In the first half of FY2026-27, nearly 90 per cent of residential PE investment came through structured debt, largely involving smaller-ticket funding for project completion.

Affordable housing loses ground as premium homes dominate supply

The growing preference for higher-priced housing represents another challenge for the sector.

Residential sales value across India's top seven cities reached a record Rs 6.10 lakh crore in FY2025-26, more than double the Rs 2.35 lakh crore recorded in FY2021-22. However, the composition of new housing supply has shifted towards high-end and luxury properties.

According to the report, these segments accounted for 45 per cent of new supply in FY2025-26, compared with 13 per cent in FY2021-22. The share of affordable housing declined from 25 per cent to 14 per cent over the same period.

Also Read: One in five Indian college students has started a business: IIT survey

The divergence raises concerns about whether housing supply is keeping pace with the requirements of lower- and middle-income households.

The report identifies residential property as a major investment opportunity but flags declining affordable supply as a structural gap.

For developers, the challenge is to create commercially viable projects at price points accessible to a wider pool of buyers. For policymakers, improving access to development finance and enabling more affordable housing construction will be critical to making growth more inclusive.

Data centre boom faces power availability constraints

Data centres have emerged as the largest destination for real estate PE investment, attracting USD 2.5 billion (Rs 23,736.38 crore), or 40 per cent of total inflows, during January-September 2026. Office assets received USD 1.7 billion (Rs 16,140.74 crore) during the period.

India's operational data centre capacity is projected to increase by around 30 per cent to 2,200 MW in 2026 and exceed 6.7 GW by 2030. The report also cites announced investment commitments of more than USD 300 billion (Rs 28,48,365 crore) for the sector.

Also Read: Jaipur emerges as a leading Tier-II commercial real estate hub, says JLL

However, infrastructure availability could constrain the pace of expansion. “Power availability, not land, is the binding constraint,” the report states.

Mumbai accounts for 53 per cent of operational data centre capacity, followed by Chennai at 20 per cent, highlighting the importance of established infrastructure hubs. New locations will need reliable electricity, connectivity and supporting infrastructure to attract large-scale development.

The report notes that Indian data centre assets are valued at approximately USD 10 million-15 million (Rs 94.95 crore to Rs 142.42 crore) per MW, compared with USD 20 million-30 million (Rs 189.89 crore to Rs 284.84 crore) in the US and Singapore, creating a potential investment opportunity.

Realising that opportunity, however, will require infrastructure providers, developers and policymakers to coordinate capacity expansion with power availability.

Investment remains concentrated in major cities

Despite growing interest in emerging markets, institutional capital remains concentrated in established metropolitan areas.

The Mumbai Metropolitan Region accounted for 49 per cent of PE investment value between 2021 and 2025. Tier-II cities represented only 3-4 per cent of investment value, although the number of deals in these markets increased from 11 during 2016-2020 to 20 during 2021-2025.

The report points to opportunities in smaller cities, particularly in hospitality, logistics and digital infrastructure. Around 45 per cent of branded hotel keys signed for development during the first half of 2026 were in Tier-III and Tier-IV cities.

Also Read: Dubai flat, Greece villa: Financial returns drive Indians’ purchase of foreign property

However, expanding investment beyond established markets will require better connectivity, predictable land policies, reliable utilities and improved governance.

In his foreword, Raj Menda, chairman of FICCI's Committee on Urban Development and Real Estate and chairman of the supervisory board at RMZ, identifies the need to make development easier and extend growth beyond major metros.

He calls for “faster approvals, single window clearances, predictable land policies and reliable power connections” to reduce costs and improve project delivery.

Real estate needs deeper capital markets

The scale of future investment requirements presents a broader financing challenge.

The report states that no single source of capital can fund the next Rs 10 lakh crore of real estate investment. Private equity, domestic AIFs, listed equity, REITs, government-backed funds, construction credit and buyer financing will all need to contribute.

Domestic funds have become increasingly important, investing USD 2.6 billion (Rs 24,685.83 crore) during January-September 2026, compared with USD 400 million in 2020. Their share of total PE investment increased from 8 per cent in 2020 to 42 per cent during the first nine months of 2026.

Also Read: India's rich look beyond cities for homes, developers follow

The report identifies real estate investment trusts (REITs), small and medium REITs, and AIFs as important mechanisms for mobilising domestic savings and recycling capital from completed assets into new developments.

Menda identifies three priorities for industry and government: deepening domestic capital markets, making development easier and extending investment beyond major metropolitan areas.

The report also highlights sustainability as an increasingly important consideration, with investors and occupiers placing greater emphasis on energy efficiency, water conservation and responsible construction.

The road ahead

India's real estate market has demonstrated resilience, with private equity investment recovering from previous economic shocks and expanding into new asset classes. However, the report suggests that sustaining this momentum will require more than attracting investment.

Closing the early-stage financing gap, reversing the decline in affordable housing supply, addressing infrastructure constraints and broadening investment beyond established metropolitan markets will determine how effectively the sector supports India's next phase of economic growth.

The central challenge is to ensure that rising capital inflows translate into a broader supply of housing, commercial infrastructure and investable assets across the country.