Data centres emerge as the new real estate darling as PE inflows rise 23%

Data centres have emerged as one of the biggest new bets for private equity investors in Indian real estate, accounting for 29% of total PE inflows in the first half of fiscal 2027, sharply up from just 4% in FY26, according to ANAROCK Research & Advisory’s latest FLUX report.

The shift comes even as office real estate continues to attract the largest share of institutional capital. Office accounted for 35% of PE inflows during April-September 2026, broadly stable from 36% in FY26.

Together, data centres and hospitality accounted for 41% of total PE inflows during the first half of FY27, signalling a widening of institutional investor appetite beyond traditional office and residential assets.

Hospitality, which attracted no PE deals in FY26, accounted for 12% of inflows in H1 FY27. Residential accounted for 14%, industrial and logistics 6%, while retail attracted no PE investment during the period.

Domestic investors emerge as second engine of real estate PE

The other major shift is the sharp rise in domestic capital.

Domestic investors deployed around $1.3 billion across 24 deals, nearly six times the $220 million invested in H1 FY26. Their share of total PE inflows rose to 48%, from just 16% in FY25.

Foreign investors, meanwhile, remained active, investing around $1.4 billion across six deals, up 19% year-on-year.

The difference was in cheque size. Foreign investors averaged around $238 million per deal, compared with $54 million for domestic investors.

This means domestic investors accounted for the bulk of transactions, while foreign investors continued to dominate larger-ticket investments.

“The depth of domestic capital is the biggest structural change we are seeing,” said Dr Prashant Thakur, executive director and head, research & advisory, Anarock Group. He said the growth in domestic capital was additive rather than replacing foreign investment, making the market more resilient to global shocks.

Investors increasingly willing to take equity risk

The composition of PE investment also points to stronger investor risk appetite.

Equity accounted for 83% of inflows in H1 FY27, the highest level since at least FY23. This compares with 77% in FY26 and 68% in FY23.

At the same time, the share of structured debt fell to 16%, from 32% in FY23.

The shift indicates a greater willingness among institutional investors to take ownership positions in real estate rather than primarily lending against projects.

Multi-city platforms gain favour

Investors are also increasingly backing platforms that operate across multiple cities rather than placing capital in individual assets.

Pan-India and multi-city transactions accounted for 49% of PE inflows in H1 FY27, up sharply from 18% in FY26.

Among individual markets, Bengaluru led with a 17% share, up from 13% in FY26, while Pune’s share almost doubled to 11% from 6%.

The share of MMR and NCR, meanwhile, declined sharply. The two markets together accounted for 16% of inflows in H1 FY27, compared with 40% in FY26.

More deals and bigger cheques.

The recovery in PE investment was accompanied by an expansion in both deal activity and transaction sizes.

The number of deals increased 36% year-on-year to 30 from 22, while average deal size rose 18% to $91 million.

“The first half of FY27 marks a clear turning point for private equity in Indian real estate. Investors are no longer just testing the waters; they are committing larger cheques, taking equity positions, and backing scalable platforms,” said Shobhit Agarwal, CEO, Anarock Capital.

FY27 could see highest PE inflows in five years

The strong first-half performance could put FY27 on track for a multi-year high in real estate PE investment.

If H2 FY27 inflows merely match the second half of FY26, total PE investment could reach around $4.8 billion, which would be the highest in at least five years, according to Anarock.

The listing of a sixth REIT during H1 FY27 has also strengthened the exit environment for private investors, potentially allowing capital to be recycled into fresh transactions.

Key points:

Data centres & Hospitality gain ground, Office leads
Office remained the largest asset class, attracting 35% of inflows, almost unchanged from 36% in FY26, as investors continued to buy completed, leased Grade A assets for stable rental income.
The sharpest shift came from new-age assets – data centres jumped to 29% of inflows from just 4% in FY26, driven by large-ticket foreign platform investments. Hospitality took 12% after recording no deals in the previous year.
Residential took 14% of inflows but led by deal count, with nearly 90% of residential capital coming through structured debt for project completion. Industrial & logistics took 6%, while retail saw no PE deals in the half due to a shortage of new Grade A mall supply.