INDIA Trends and Developments Contributed by: Vivek Chandy, Archana Tewary, Brijita Prakash and Utsav Johri, JSA
Real Estate in India – Resilient in the Face of Global Headwinds The past year has seen global geopolitical challenges arise resulting in overall economic unpredictability, and in the face of such headwinds the real estate sector in India has also had to adapt. The real estate industry in India is often appreciated for its resilience, and in a country where affordable housing projects share space with some of the most expensive luxury developments in the world, the potential for further growth is undeniable irrespective of the temporary impact from global trends. Regulations governing foreign investment in Indian real estate remain considerably liberalised compared with 2005, when the sector was first opened to such investment. The key principles for the sector in India remain that foreign direct investment is not permitted in “real estate business” – ie, speculative investments in real estate projects (such as investments in unde - veloped land or fully developed projects), and that foreign investment must not be permitted to interfere with the holding and cultivation of agricultural land. However, over the past two decades, the govern - ment of India has taken several steps to liberalise the sector to the fullest extent possible while preserving these principles across all types of developments (be they residential, commercial, mixed-use, industrial, etc). During the course of these past two decades, the real estate market has moved from focusing on a handful of large or metro cities to tapping into the potential for value appreciation in Tier II and Tier III cities. The development of smart cities and affordable housing by the government has bolstered the growth of residential real estate, whereas the development of infrastructure and business hubs across the country have enabled companies in sectors such as logistics and manufacturing to move their activities to Tier II and Tier III cities, or locations bordering Tier I cities to make leasing more affordable. Liberalised external commercial borrowing (ECB) regime The recent liberalisations by Reserve Bank of India (RBI) in the cross-border lending space will also be a meaningful inflection point for real estate financing in India. By permitting ECBs for construction-devel - opment projects, including residential or commercial
buildings, hotels and hospitals and also for controlled acquisitions and removing the cap on interest, RBI has opened access to a new pool of capital to the real estate sector. These liberalisations are expected to progressively reduce reliance of the real estate sector on domestic non-banking finance company funding and listed/unlisted non-convertible debenture issu - ances for borrowers who have the appetite. It is also likely that new categories of offshore lenders, such as private credit funds, sovereign financing institutions and foreign real estate-focused investors will find the ECB route more accessible and attractive for deploy - ing debt capital in the real estate sector. Sustained uptrend in office leasing Industry experts noted that the demand for commer - cial real estate saw a record increase in 2025, with leasing and use of flexible working spaces seeing remarkable growth in cities such as Mumbai, Bengalu - ru, Hyderabad and Pune. While driven by the increas - ing development of global data and capability centres, it is interesting to note the increased leasing activity in both Tier I and Tier II cities. Industry reports indicate that India’s net absorption for 2025 rose to a record high of 57.0 million sq. ft, reflecting increasing inter - est in leasing new developments across the country. There continues to be a push for high-quality grade A office spaces to be developed across the country, emphasising that the sector is evolving into a more sophisticated industry. Developers are increasingly incorporating eco-friendly designs, energy-efficient systems and sustainable materials into their pro - jects. Green buildings are designed to reduce energy consumption, optimise water use and minimise car - bon emissions. They often include features such as solar power systems, rainwater harvesting and smart energy management technologies. These features are especially important for multinational companies, many of which follow internal environmental, social and governance (ESG) standards. Markets such as Bengaluru, Mumbai and Pune, where governments have specific policies to boost start-ups and global capability and data centres will likely con - tinue to see growth. An extension of this process has been the performance of real estate investment trusts (REITs) in India. The performance of these REITs, par -
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