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PE investment in retail real estate in first half of 2016 highest at Rs 3,350 cr; Delhi-NCR tops in new malls supply

Private equity (PE) investors invested Rs 3,350 crore in the retail in the first half of 2016, making it the highest investment as compared to Rs 250 crore in the first half of 2015 on the back of improved leasing activity, relaxed government policies and positive economic outlook.

By: | Published: September 22, 2016 1:40 PM
PE investment in retail real estate in first half of 2016 highest at Rs 3,350 cr; Delhi-NCR tops in new malls supply Retail real estate: The institutional and PE investors are both bullish on the retail sector in India following better leasing, government policies and country’s economic prospects. (Reuters)

In what could bring some cheer to the sluggish real estate sector, private equity (PE) investors invested Rs 3,350 crore in the retail in the first half of 2016, making it the highest investment as compared to Rs 250 crore in the first half of 2015 on the back of improved leasing activity, relaxed government policies and positive economic outlook, said a study by global real estate consultants Cushman & Wakefield. This is the highest annual PE investments made since 2008. The institutional and PE investors are both bullish on the retail sector in India following better leasing, government policies and country’s economic prospects.

“H1 2016 also saw new mall supply increase to 4.8 msf in H1 2016 from a mere 0.2 million square feet (msf) in H1 2015. This is the highest half yearly supply in five years,” the study by Cushman & Wakefield said.

Among the top 8 cities that included Ahmedabad, Bengaluru, Chennai, Delhi NCR, Hyderabad, Pune, Kolkata and Mumbai, the national capital region saw the highest supply of malls in the first half of 2016, followed by Pune and Mumbai. These new mall spaces are expected to provide quality spaces to retailers, and wider options for expansion across multiple cities.

At 64 per cent, Delhi-NCR saw the maximum share of new supply of malls in first half of 2016 owing to completion of one of the largest malls in India, Mall of India, followed by Pune, where three malls became operational, spanning a total of 0.8 msf during H1 2016, while Mumbai witnessed 0.4 msf of mall space coming into supply.

“Delhi NCR and Mumbai remain the largest retail markets, accounting for 35% and 20% respectively of the mall stock across the top 81 cities in India. Bengaluru is the third largest market, accounting for about 12% of the total stock,” the study said.

On vacancy rate, Ahmedabad, at 33 per cent, topped among 8 cities, while Pune and Delhi-NCR at 20 per cent accounted for the second highest vacancy rate, followed by Mumbai (16 per cent) and Bengaluru (12 per cent). At 4 per cent, the vacancy rate in Hyderbabd was lowest at 4 per cent. Chennai and Kolkata saw vacancy rate at 8 per cent and 5 per cent respetcively.

The study also said that inflow of single brand foreign retailers remained high and are rapidly expanding their chains. Some of the prominent retailers that have entered Indian markets in H1 2016 are Muji, BoConcept, Neil Barrett, Massimo Dutti, Armani Exchange, and Cole Haan.

With the government clearing tax hurdles for Real Estate Investment Trusts (REIT), PE funds are increasingly exploring opportunities in the retail sector as the retail assets can also be listed under a REIT portfolio. The share of retail sector assets in cumulative PE investments in India has therefore, increased to 18% in H1 2016 as compared to 2% recorded in H1 2015.

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