Historically low capitalization rates have shifted investor strategies toward operational improvements and strategic asset selection across India's commercial real estate sectors. Total Grade A office inventory expanded to 952 million square feet by the third quarter of 2026, with Global Capability Centres accounting for over 40% of leasing activity during the past decade. Institutional transformation is also expanding rapidly into logistics and retail, where a 40-million-square-foot retail supply pipeline is anticipated by 2030.
Key points
Commercial assets continue to yield double-digit unlevered internal rates of return over…: Commercial assets continue to yield double-digit unlevered internal rates of return over five-year investment cycles as the market matures.
Nearly 200 million square feet of non-premium office space presents value-add opportuniti…: Nearly 200 million square feet of non-premium office space presents value-add opportunities through asset repositioning and operational upgrades.
Regulatory shifts such as GST implementation and rising e-commerce demand have transforme…: Regulatory shifts such as GST implementation and rising e-commerce demand have transformed domestic warehousing into an institutional-grade strategic asset class.
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The report, titled ‘A Decade of Change: The Institutionalization of Commercial Real Estate in India’, highlights that despite cap rates compressing to historic lows and tighter bid-ask spreads across key asset classes, the Indian real estate market continues to offer double-digit unlevered internal rates of return (IRR) over a typical five-year investment period.
However, the drivers of returns are changing. With limited scope for further cap rate compression, investors will increasingly have to rely on net operating income (NOI) growth, strategic asset selection and operational efficiencies to generate returns.
India's real estate sector has attracted approximately $78 billion in institutional capital since 2014, reflecting its growing appeal as a globally recognised, institutional-grade investment destination. Office assets accounted for 46% of the total institutional investments during this period.
The institutionalisation of the sector is also evident in the significant compression in capitalisation rates across key segments. Between 2016 and the third quarter of 2026, office cap rates tightened by 270 basis points, retail by 320 basis points and warehousing by 250 basis points.
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