NEVER AGAIN OR ‘NEXT OPPORTUNITY’? by Prakash Kalothia
27-Feb-2026
At a real estate conference in Boston earlier this year, an investor who had backed an India-focused real estate fund in 2006 remarked, “India is a NEVER AGAIN market.” I have sometimes heard stronger versions of this sentiment before. Given several factors which operated in the pre-GFC investment cycle, such sentiments though understandable, also coax me to compare the performance of India real estate funds in the pre- and post-GFC period.
In contrast to the performance of pre-GFC India real estate funds, the experience of post-GFC entrants to the Indian real estate market such as Blackstone tell a different story. Having listened closely to Jon Gray’s public remarks for over a decade, it is clear that India is considered both a large and profitable market for them. Their capital deployment, exits, and REIT strategy reinforce that view.
These two opposing narratives — frustration and disappointment from early entrants and strong conviction from post-2010 investors — raise a natural question: What does the data say?
To objectively assess the performance and prospects of India’s real estate sector, it is essential to examine what the data demonstrates about investment outcomes across these different periods.
This paper attempts to answer that question objectively, using my own experience from 30 years in India’s real estate industry and data from Cambridge Associates’ vintage-year benchmarks.
My involvement with Indian real estate began in 1995, ten years before the sector opened to foreign capital. In 2006, I helped establish SUN-Apollo, a USD 630 million India-focused real estate fund. I helped source the firm’s first two investments and later steered the platform through the global financial crisis, protecting the 2007–08 transactions and deploying remaining capital during 2009–12.
I subsequently created Lapis in 2016, a successor to SUN-Apollo, to manage exits. In 2019 and 2020, Lapis also became the replacement manager for two IL&FS India real estate funds, together totalling more than USD 1.3 billion. Between SUN-Apollo and the IL&FS funds, Lapis has overseen USD 2 billion, more than half of all pre-GFC India-focused real estate fund capital. Because two of these funds are fully liquidated and the third is nearing its end, I have had the rare vantage point of seeing the entire movie — from raising capital, to deployment, asset management and repatriation.
In my view, a lot of the commentary on India’s real estate sector may be coming from people who witnessed the early or mid-phases of the sector, often from a distance. I therefore hope to offer a slightly different perspective on the sector’s performance based on my experience.
When India opened its real estate sector to foreign capital in March 2005, the investible market was still in early stages. Office stock was roughly 100 million square feet across major markets, but much of it was strata sold or individually owned, leaving ownership structures still nascent and largely outside institutional models. Organized retail/mall space was growing, but modern, large-scale mall stock was limited (5–7 million square feet) relative to what would follow in later years. Branded/quality hotel inventory, as captured by major industry surveys, covered less than 50,000 rooms at that time. Residential launches (for-sale units) and commercial developer capacity existed but were more limited than in mature markets, and governance/regulatory standards were evolving.
India’s 2005 regulatory change that allowed foreign capital in large ground-up developments and the BRICS narrative triggered a surge of global capital into India. Several India-focused commingled funds were raised and global platforms — including MSREF, Lehman, Whitehall, and others — deployed capital from their international vehicles. India-focused funds raised roughly USD 3–4 billion.
Most India investments during 2006–07 were large master-planned developments — in the suburbs, in distant emerging corridors, or in newly imagined city centres. Underwriting 5–7 million square-foot developments with 5–7-year business plans was routine. The developers pitching them had never built anything comparable.
Meanwhile, India’s cost of debt was high, construction delays were common, and liquidity markets were underdeveloped. It was a textbook case of capital arriving faster than capability, with long-dated developments being force-fit into limited-life fund structures.
Long-dated developments are inherently complex plays even in mature markets. In India, the learning curve was steeper — land acquisition, obtaining approvals, construction management, labour availability, inflation and financing all posed challenges. On top of that, legal enforceability of contracts was untested for cross-border equity capital.
Most developers had only dealt with bank debt or pre-sales capital. Equity — especially foreign equity — was new. On paper, investors had multiple exit options: IPOs, strategic sales, put options, and so on. But single-asset IPOs were never realistic, and regulations did not allow purchase of stabilised assets by foreigners until 2011. Ultimately, the put option became the default exit plan, which was impractical given counterparties’ weak balance sheets.
Limited-life funds were thus left with no true exit other than trying to enforce economically unviable puts in an unclear regulatory environment. Development delays, high debt costs, and weak counterparties meant even stabilised projects could have their equity wiped out. The challenges were systemic, not unique to any one micro-market or manager.
However, if one avoided development risk and simply owned infill land, one generally did well as urbanization drove strong appreciation. If one converted that land into an income-producing asset — an office building or a retail centre — with healthy development yields and the strong cap-rate compression seen post-2015, one also performed well. The real challenge lay in investments that were neither pure land nor stabilized assets but were stuck in between — carrying development risk, debt, and other liabilities. These were further strained by the need to exit within limited-life fund structures, often forcing sales before value could be fully realized.
It was a classic emerging-market timing mismatch amplified by a once-in-a-century global liquidity crisis.
Cambridge Associates’ Real Estate Benchmark Book (Q4 2017) shows:
2004 vintage: IRR 0.90%, TVPI 1.04
2005 vintage: IRR –0.27%, TVPI 0.98
2006 vintage: IRR –2.39%, TVPI 0.86
Lower-quartile funds across these vintages delivered IRRs between –4.8% and –6.4%.
These numbers tell an essential truth: global real estate vintages 2004–06 were weak everywhere, not just in India. In the Indian context, the experience of investors may have been amplified by the systemic issues surrounding the Indian real estate market at that time.
Among Core, Core+, Value-Add, and Opportunistic funds, it was opportunistic funds that took the biggest hit in global markets. Unfortunately for India, all we had to offer then were opportunistic strategies.
The views expressed in this article are personal and do not reflect the views of SUN-Apollo, SUN, Ares, the IIRF Funds, their respective investors and managers. The information and views expressed in this document are for informational purposes only and do not constitute financial, investment, or legal advice. Readers are advised to conduct their own due diligence and consult with professional advisors before making any investment decisions. While every effort has been made to ensure the accuracy of the data and analysis presented, the author does not accept any liability for losses or damages arising from the use of this content. Past performance is not indicative of future results, and market conditions are subject to change.