MUMBAI: The private equity investment in retail real estate during the first half of this year is the highest annual investment made since 2008 as the entry and expansions of foreign retail brands in India post the FDI relaxation has necessitated the demand for quality space in key locations across the country. The total PE investment in the retail segment during H1 2016 stood at Rs 3,350 crore as compared to Rs 250 crore in the corresponding period last year.
Since 100 per cent FDI in single brand retail is allowed under the automatic route, several foreign retail brands have entered India and are rapidly expanding their chains. According to property consultant Cushman & Wakefield, 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.
Several retail brands such as Kate Spade, Cath Kidston, Apple and Ikea are among others in the process of opening their first stores in India. The first half of this calendar year also saw new mall supply increase to 4.8 million square feet (msf) in H1 2016 from a mere 0.2 msf in H1 2015. This is the highest half yearly supply in five years. Delhi-NCR accounted for the highest supply during H1 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. “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. In addition to consumer spend, which increased by 10 per cent during last 12 months, E-commerce is also contributing to the increased retail spending by Indian consumers in a big way,” said Anshu Jain, managing director, Cushman & Wakefield, India.
According to him, 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 added. The share of the retail sector assets in cumulative PE investments in India has consequently increased to 18 per cent in H1 2016 as compared to 2 per cent recorded in H1 2015.
