JLL says India's commercial property investors may need to draw more of their returns from operating income and asset management as further declines in capitalization rates become less likely.
A separate JLL capital-flow report shows investment is still entering the market. It recorded $4.4 billion in Indian real estate investment from January through June 2026, up 25% from a year earlier, across 54 transactions.
Domestic institutions supplied 63% of that capital, while offices drew 54% of investment. Foreign institutional investment declined 35% from the first half of 2025, JLL said. Those figures measure six months of flows, while its new study examines a longer period.
In that study, JLL estimates institutional investors have put about $78 billion into Indian real estate since 2014. It says cap rates fell by 320 basis points for retail properties, 270 for offices and 250 for warehouses from 2016 through the third quarter of 2026.
JLL describes the rate declines as part of a broad repricing of commercial property over the past decade. As scope for further declines narrows, it expects growth in net operating income to matter more. It also emphasizes asset selection and operating efficiency.
For high-quality offices, JLL sees potential for double-digit unlevered internal rates of return over a typical five-year holding period. That outlook applies to those properties; the cap-rate figures describe changes JLL says have already occurred.
Lata Pillai, JLL's senior managing director and head of capital markets in India, said the next phase would be driven by "income growth rather than cap rate movement." She linked the limited scope for further cap-rate declines to interest-rate trends.
The study also identifies more than 600 million square feet of planned office, retail and warehouse space. Separately, it points to about 200 million square feet of existing non-premium offices that could be repositioned. The figures distinguish new supply from buildings already standing.
