PE investment in retail realty zooms 13-fold to Rs3,350 crore in H1FY17

Private equity (PE) investment in retail real estate jumped over 13-fold to Rs3,350 crore in the first six months of this year (January-June 2016) on the back of some big-ticket deals, according to a global property consultant.

"The first half of 2016 witnessed the highest annual PE investments in retail with over Rs3,350 crore being invested, compared to only Rs250 crore invested in H1 2015. This is the highest annual PE investment made since 2008," Cushman & Wakefield (C&W) said in a statement.

Institutional and PE investors are more confident towards investing in retail assets owing to factors such as improved leasing activity, relaxed government policies and positive economic outlook, it added.

Moreover, 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 consultant said.

The share of retail sector assets in cumulative PE investments in India has increased to 18 per cent in H1 2016 as compared to 2 per cent recorded in H1 2015.

"The Indian retail market appears to have bottomed-out from its slack and is expected to grow in the coming years. Factors such as positive economic outlook and large market potential continue to attract retailers to India," C&W India MD Anshul Jain said.

"In addition to consumer spend, which expanded by 10 per cent during last 12 months, e-commerce is also contributing majorly to the increased retail spending by Indian consumers," he added.

Jain said some e-commerce companies are expected to take up physical spaces in malls to reach out to a wider Indian audience.

"Retailers are also increasingly consolidating their operations by mergers and acquisitions to cut down competition, gain market share and capitalise on synergies to get better results for their bottom-lines. All of these trends are resulting in increased investments by financial institutions and PE funds in this asset class," he said.

Terming higher PE investment as encouraging development, Jain said the focused and more institutional ownership of malls would help to bring in even more professional management and development of the malls, leading to maturing of the retail sector within India.

The new mall supply increased to 4.8 million square feet in the first half of 2016 from 0.2 million square feet in the same period of 2015.

Delhi NCR accounted for 64 per cent of the share in new supply during the first half of 2016 but it also accounts for the second highest vacancy rate (20 per cent), owing to over-supply of retail spaces in the market.

Delhi NCR and Mumbai remain the largest retail markets, it said, accounting for 35 per cent and 20 per cent, respectively.