The rise of Alternate Investment Funds (AIFs) has significantly impacted India's real estate landscape, providing critical funding to projects in need and driving the development of essential infrastructure. According to the latest research by ANAROCK, the AIF sector saw a total investment of Rs 5061.96 billion across various industries by the end of the third quarter in FY2025. Among these sectors, real estate took the lion's share with Rs 739.03 billion—15% of the total AIF investment.
AIFs, which are private pooled funds investing in non-traditional assets such as private equity, hedge funds, and real estate, have become an attractive source of high-risk, high-reward financing. The sector has grown remarkably over the last few years, and its role in revitalizing stalled projects has been especially significant.
Real Estate Remains a Strong Investment Sector
The surge in AIF-backed investments has helped various sectors, but real estate continues to lead, with Rs 739.03 billion flowing into this domain as of 9M FY25, an 8% increase from Rs 685.4 billion by FY2024-end. As investments in real estate rise, they continue to impact linked industries such as cement, steel, and construction labor, contributing to job creation and economic growth.
Prashant Thakur, Regional Director and Head of Research at ANAROCK, explains, "With traditional funding sources facing constraints, AIFs have emerged as a flexible and innovative mechanism to bridge capital gaps in real estate. By pooling funds from both domestic and foreign investors, AIFs have created a scalable and sustainable funding ecosystem."
Impressive Growth in AIF Commitments
AIFs have experienced remarkable growth in both number and value of investments. The number of AIFs in India has grown 36-fold over the past decade, from 42 in 2013 to 1,524 by March 2025. This growth reflects an annual compound growth rate (CAGR) of 83.4% in investments, underscoring the increasing reliance on AIFs in India's investment landscape.
The surge in commitments is largely driven by Category II AIFs, which have contributed almost 80% of total investments in the past five years. These AIFs have diversified across sectors such as IT/ITeS, financial services, and renewable energy, further enhancing their role in the Indian economy.
SWAMIH Fund's Vital Role
Among the key players in the AIF space is the SWAMIH Fund, India's flagship fund, which has provided over Rs 350 billion to revive stalled real estate projects. This has helped complete thousands of housing units, bringing much-needed relief to homebuyers and contributing to stability in the real estate market.
Anuj Puri, Chairman of ANAROCK Group, says, "SWAMIH Fund has been instrumental in supporting the completion of thousands of housing projects, benefiting homebuyers and contributing to market stability. However, the journey hasn't been without challenges."
Despite the fund's success, SWAMIH faces several obstacles. The Rs 15,000 crore corpus through SWAMIH II is insufficient to address the approximately 2,000 stalled projects across the country. Regulatory hurdles, such as insolvency cases under the NCLT, expired RERA registrations, and environmental clearance issues, have slowed the process.
Puri adds, "The SWAMIH Fund's efforts highlight the need for systemic reform in India's real estate sector. Tackling regulatory delays, lender resistance, and cash flow issues will unlock the full potential of this funding mechanism."
Looking Ahead
The future of AIFs in India looks promising, with expectations that the sector will continue to grow and evolve. AIFs will play a critical role in meeting India's infrastructure and real estate needs, provided the regulatory environment is conducive to their expansion. The continued support of Category II AIFs and innovative funding models like SWAMIH will be essential in driving India's economic growth in the years to come.
As India faces an increasing demand for housing and infrastructure, AIF-backed investments will remain a crucial tool in addressing funding gaps, revitalizing stalled projects, and creating opportunities for both developers and investors alike.
