Retail Real Estate in India is Set for an Explosive Growth

On the back of the growing middle class, surge in per capita income & changing consumer patterns, the retail industry in India is advancing at an unprecedented pace. Currently, the retail market in India is estimated to be around USD 790 billion & is expected to reach USD 1400 billion by 2024. The organized retail is estimated to be over 15% of the total retail space in the country. The massive Indian middle class- estimated at around 300-400 million - is feeding into the demand for more retail space.

In its previous term, the government has allowed 100% FDI in single brand retail & 51% in multi-brand retail, which is further attracting major global players. Besides, numerous other factors such as digitization, urbanization & lifestyle changes are also propelling the growth juggernaut.

The rapid growth in the retail industry is not just limited to Tier-1 cities but is also visible in the smaller Tier- 2 & 3 cities. Cities such as Nagpur, Kanpur, Lucknow, Vizag, Mysore, Dehradun etc. are witnessing tremendous growth in the retail industry. Infrastructure upgrades are enabling more growth in the smaller cities of India. Likewise, Internet penetration is also generating more brand awareness about the latest products & brands, thereby further dovetailing retail growth in such smaller cities.

As the retail industry is growing at an unprecedented pace, retail Real Estate is also clocking commendable growth numbers. It is becoming a vibrant industry segment amongst the Indian Real Estate industry, as institutional investors are stepping into the domain in big numbers.

PE Players are Binging on Indian Retail

After office Real Estate, which is favored by most of the institutional players, the retail industry in India also features actively on the radar of numerous buyers. As the growth prospects look promising in Indian Retail, private equity players from both India & abroad are binging big on the market. Since 2017, the momentum has been gaining in terms of investments in the Indian retail industry. As per estimates by Anarock, institutional money of over USD 1.9 billion has entered the Indian retail landscape during 2015 & Q1 2019. This has also been helpful in boosting mall supply in the country, which is expected to reach 65 million Sq. Ft by the end of 2022. Chandigarh, Mumbai, Bengaluru, Pune, & Hyderabad have been the frontrunners in attracting institutional money for mall development.

Institutional players are scouting for both built-up projects as well as partnering with local players to develop new malls & other retail formats. Blackstone through its subsidiary Nexus Malls are investing into existing malls & enabling them to scale up fast. Likewise, Warburg Pincus has decided to invest USD 200 million with Runwal Group to develop malls all around the country. ADIA-backed Lake Shore India Advisory has invested USD 195 million in developing retail projects in Gurugram.

In the times to come, organized retail will continue to grow in the country. Alongside large-scale malls, other formats of organized retail such as high street, discount stores & departmental stores will also grow at an accelerated pace. Tier 2 & 3 cities will also help towards managing growth as these places currently account for an expansive middle class population of around 100 million. In tandem with the growth of the retail sector, institutional money will also continue to enter the space stemmed by higher growth potential, attractive returns & mitigated risk.