Indian Retail Real Estate Experiences Powerful Rebound

Mall retailers in India’s Tier 1 and Tier 2 cities (urban and suburban areas included) have flourished in the last two years, defying post-COVID speculations. Displaying a resilient retail market and enjoying strong performance, shopping centres have prospects to innovate and repurpose real estate, thereby making themselves profitable to investors. Amid an imminent economic downturn, investors are considering when to reinvest in shopping centres.

The two-day Shopping Centres Next 2023 event, hosted in Bengaluru, opened its doors to industry leaders, experts, and enthusiasts on October 3, 2023, to share valuable insights into the lucrative shopping centres sector for investors. The first day of the event brought forth a wealth of insights into the evolving landscape of shopping malls in India, highlighting their transformative role as hubs of community, technology, and growth.

As many as 24 new global brands have forayed in the last two years across Mumbai, Delhi NCR, Bengaluru, Hyderabad and Chennai. The operational retail stock as of H1 2023 stands at 89 million sq ft in Delhi NCR, Mumbai, Pune, Bengaluru, Kolkata, Chennai and Hyderabad together. With Gen Z, young workforce, better purchasing power and growing GDP, there is not a better time for investors to consider putting funds into building shopping centres and reaping benefits with value.

As demonstrated in the discussions on day 1 at the event’s masterclass for shopping professionals, India has emerged as a coveted destination for global brands. Increased consumption, growing institutional participation, strategic collaborations with Indian retail chains, and a supportive regulatory environment have all contributed to India's allure.

Despite the growth in mobile and online commerce, physical stores continue to hold the ground in terms of offering experiential shopping and fostering social connections.

Shopping centres are evolving into community centres where people gather not only for shopping but also for entertainment, relaxation, and socializing. This shift underscores the importance of malls in our communities.

Speaking about the key to extracting value from shopping centres at the Masterclass, Rajendra Kalkar, President - Malls & Whole Time Director, the Phoenix Mills Ltd., said, “When you sell an asset, you realise the value instantly. For the retail space players such as hotels, hospitals and upcoming annuity businesses like data centres or warehousing, there are twin benefits. One is the capital which can double, triple, etc. depending on the land prices in the location and various socio economic factors. The second benefit is annuity income (inflationary income). The moment one builds a good shopping centre, runs it well and ensures consumption, retailers can do fabulous business and make money from their turnover rent. There is an art to making this turnover rent income. Today, hardly 100 malls in India have been able to achieve this. There is enough potential for this.”

Citing the purchasing power and volume of purchasers in the country, he projected that with India beating China in GDP growth last year, this trend is set to grow at least for the next 10-15 years. “Also, the earning age of customers itself is a key factor to consider investing in shopping centres in India and reaping benefits from it,” he added.

Further elaborating on the need to make sure that the shopping centre becomes a part of the community and vice versa, it is important that investors plan to integrate social connections at the starting stage of mall design planning itself. “For Gen Z, shopping centres are where community building begins; that is the heart of their needs to meet, dine, socialise, refresh and spend time. There are ample ways to build on these needs such as organising health awareness programmes, wellness and fitness programmes, art projects, etc.”