India’s real estate sector has emerged as the top beneficiary of Alternative Investment Funds (AIFs), attracting ₹73,903 crore by December 2024, according to new data compiled by property consultancy Anarock. This sector alone accounted for 15% of the total ₹5.06 lakh crore deployed by AIFs across various industries, making it the highest among all sectors.

AIFs—privately pooled investment vehicles targeting sophisticated domestic and foreign investors—have grown into a significant financial force. Typically focused on non-traditional assets like private equity, hedge funds, and real estate, these funds are increasingly used to plug financing gaps in India’s evolving property market.

“The rise of AIFs has significantly transformed real estate financing in India, offering a crucial lifeline to projects struggling with lack of funding and unlocking new opportunities for developers,” noted Anarock. These funds have become especially relevant as traditional lending sources grow more constrained.

Prashant Thakur, Regional Director & Head of Research at Anarock, emphasized AIFs’ role in the development ecosystem. “Amidst increasing constraints on traditional funding sources, AIFs are an agile and innovative financing mechanism to address capital gaps at various stages of real estate development,” he said. Thakur added that integrating blended finance models and AI-based risk assessment tools will further strengthen the sector’s future.

The data highlights a broader shift in investor behaviour. Sectors like IT/ITeS (₹30,279 crore), financial services (₹26,807 crore), and NBFCs (₹21,929 crore) also received sizable investments. However, real estate retained its lead, supported by growing interest in real assets as part of diversified financial portfolios.

“Real estate’s continued dominance in AIF allocations is a natural outcome of how investors rethink their portfolios,” said Binitha Dalal, Founder and Managing Director of Mt. K Kapital. “Real assets are now being approached as part of financial portfolios, not just physical holdings.” She added that this shift reflects both changing mindsets and the emergence of new fund structures tailored to varying risk-return profiles.

AIF activity in India has surged dramatically over the last decade. From just 42 registered AIFs in 2013, the number has climbed to 1,524 as of March 5, 2025. Investor commitments have also risen five-fold since 2019, further underlining the sector’s rapid institutionalization.

Ankur Jalan, CEO of Golden Growth Fund, pointed out the increasing relevance of AIFs for investors and developers. “They have become an important investment vehicle for institutional investors and HNIs and have also widened the scope for developers to secure funding,” he said.

As India’s real estate sector matures and funding models diversify, AIFs are poised to remain central in driving capital flows into one of the country’s most dynamic industries.