PE funds put more money into malls

Chennai: Despite the slowdown in consumption, private equity funds are quite optimistic about the long-term prospects of mall properties. PE funds’ investment into retail real estate grew almost three-fold in 2019 over the previous year.

Retail real estate grabbed $970 million PE funds in 2019 against $355 million in the previous year, registering a growth of 173 per cent. Overall PE inflows into Indian retail touched $2.8 billion in the five years between 2015 and 2019.

“Investors are betting big on selected Grade A mall projects which have high scope of business profitability. Despite the consumption slump, many malls are doing excellent business today - and investors are keenly vying for such projects,” said Shobhit Agarwal, MD and CEO, Anarock Capital.

According to Anarock, PE funds see the ongoing consumerism slump in India as a seasonal phenomenon and hope that enthusiastic government- backing to the retail sector will cause the tide to turn in the near future.

Apart from the top cities, tier- II and III cities are also on the radar of many PE funds which see these cities actively driving the retail business, going forward. At least 36 per cent of retail-focused funds went to cities like Ahmedabad, Amritsar, Bhubaneshwar, Chandi-garh, Nagpur and Mohali.

JLL says rising incomes, increasing awareness and high aspirations in tier- II and III markets spell a big opportunity for retailers. These locations are unexplored and real estate cost here is 30-40 per cent lower than that in metros.

By industry estimates, the market size of tier- II and III markets would grow from $5.7 billion in 2018 to $80 billion by 2026. Around 50-60 per cent of expansion by modern trade is taking place in tier- II and III markets.