India’s commercial real estate sector is witnessing a widening disconnect between rising occupier demand and the availability of institutional capital required to create fresh supply, particularly in the office and warehousing segments. Industry experts warn that the shortage of deployable funds could emerge as a key hurdle for the sector’s next growth phase.
According to an assessment by Knight Frank India, nearly USD 2.3 billion of undeployed capital currently available in the market can support only around 12.2 million sq ft of new office development. This accounts for merely 14% of India’s annual office space demand, which touched 86.4 million sq ft in 2025.
Shishir Baijal, International Partner and CMD at Knight Frank India, said India’s commercial property market has entered a stage where demand from occupiers is significantly outpacing institutional funding availability. He noted that despite strong office and warehousing demand, existing dry powder can finance only a limited portion of future development.
Between 2021 and 2025, real estate-focused Alternative Investment Funds (AIFs) attracted capital commitments worth USD 14.5 billion. Of this, USD 7.9 billion was raised and USD 5.7 billion has already been deployed, leaving a relatively small pool for upcoming projects.
Office assets continue to attract investors due to stable rental yields and favourable cap rates ranging between 7.25% and 7.75%, slightly higher than India’s 10-year government bond yield.
India’s top eight office markets recorded 307.7 million sq ft of transactions over the last five years, exceeding the 236.1 million sq ft of fresh supply delivered during the same period. Consequently, the office supply-to-demand ratio has fallen sharply to 0.63 in 2025, highlighting a growing supply shortage.
Source: The Economic Times
