 "Real estate leads AIF investments with Rs 75,468 cr in first half of FY25")
Real estate has stood out as the leading choice for Alternate Investment Funds (AIFs) in India. Latest data from market regulator Sebi indicates that out of a total of Rs 4,49,384 crore AIF investments made across sectors till the first half of fiscal 2025, real estate’s share was the highest at 17 per cent, totalling nearly Rs 75,468 crore.
Other sectors benefiting from AIF investments are IT/ITeS, Financial Services, NBFCs, Banks, Pharma, FMCG, Retail, Renewable Energy, and others.
AIFs refer to a category of pooled investment vehicles that are established to raise capital from investors, typically for investing in assets or opportunities outside of traditional investment avenues like stocks, bonds, or mutual funds. These funds can invest in a variety of asset classes such as private equity, venture capital, hedge funds, real estate, commodities, and infrastructure, among others.
"By the end of H1 FY25, total investments in the real estate sector via AIFs have risen from Rs 68,540 crore by FY 2024-end to Rs 75,468 crore. This is a significant10% growth in just half the financial year," said Anuj Puri, chairman of Anarock.
AIF in India have seen substantial decadal increase in the number of funds available for investment. AIFs’ overall commitment raised rose by over 340% in the last six years – from Rs 2,82,148 crore in FY 2019 to Rs 12,43,083 crore in H1 FY2025, reflecting increasing appetite for alternative investment strategies.
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Between FY2013 to FY2024, the commitment raised in AIF sector has maintained an 83.4% compound annual growth rate (CAGR).
AIFs are classified into three categories:
- Category I AIFs: These include funds that invest in start-ups, small and medium enterprises (SMEs), or social ventures, typically considered to have a positive impact on the economy.
- Category II AIFs: These funds invest in sectors like private equity, debt funds, or real estate and do not have any specific social or economic target like Category I.
- Category III AIFs: These are funds that employ complex trading strategies and may invest in hedge funds, derivatives, and other complex financial instruments.
AIFs in the Real Estate Sector in India
In the context of real estate in India, AIFs have become an important investment vehicle for institutional investors, high-net-worth individuals (HNIs), and family offices. Real estate-focused AIFs typically pool capital to invest in residential, commercial, and mixed-use properties or in real estate development projects.
"A deep dive into the data reveals that the surge in AIF activity is largely driven by Category II AIFs, which include a mix of Real Estate Funds, Private Equity, Debt Funds, and Fund of Funds (FoF)," said Puri. "The data indicates that over the last five years, Category II AIFs have been responsible for nearly 80% of total AIF commitments, highlighting the dominance of these flexible and tailored investment vehicles."
Traditionally, domestic investors have been the primary source of AIF funding. However, foreign portfolio investors (FPIs) are also stepping up, especially in the case of Category II AIFs. In this category, FPIs now have an almost equal participation alongside domestic investors.
"With many real estate projects requiring significant working capital throughout their lifecycle, AIFs have provided a vital source of funding. These funds offer a customized capital stack that addresses the unique needs of real estate developers, helping to manage everything from construction to long-term project financing," said Anarock.
In the first nine months of CY24 alone, the real estate sector saw Rs 28,560 crore raised through private equity investments, according to Anarock Capital. Real estate accounted for 17% of total sectoral investments this year.
Rs 12,801 crore were also raised via Qualified Institutional Placements (QIPs) within the same period - again, the second highest among all the major sectors and comprising a 17% overall share.