PE inflow in Indian retail real estate doubles to USD 1.2 bn in 2017, 2018: Anarock

Indian retail real estate sector attracted private equity investment worth USD 1.2 billion during 2017-18 calendar years, double from the previous two years, according to property consultant Anarock.

The consultant attributed the sharp rise in private equity (PE) inflow to further liberalisation in FDI policies such as 51 per cent FDI in multi-brand retail and 100 per cent FDI in single-brand retail under the automatic route.

From an investment of USD 600 million during 2015-2016 calendar years, private equity inflows in retail real estate jumped to over USD 1.2 billion between 2017 and 2018.

Of total USD 1.84 billion inflow in the last 4 years (2015-2018), tier II and tier III cities attracted nearly 48 per cent funds (USD 880 million) against USD 960 million in tier 1 cities.

Top favoured tier II and tier III cities included Amritsar, Ahmedabad, Bhubaneshwar, Chandigarh, Indore and Mohali.

US-based funds like Blackstone and Goldman Sachs have invested more than USD 1 billion between 2015-2018, while UAE, Singapore, Canada and Netherlands based funds were also active.

Shobhit Agarwal, MD & CEO - Anarock Capital says, "our report highlights the fact that unlike the commercial office sector, retail is to some extent geography-agnostic because its success depends on the spending power of its target audience.

"As a result, shopping malls in tier II and tier III cities have performed as well as, if not better than, their tier 1 counterparts. This also led to increase in rentals and profitability and caused PE investors to start considering investment options outside their accustomed tier I geographies, he added.

Anuj Kejriwal, MD & CEO - Anarock Retail said, "the opportunity that the Indian retail sector holds in store for PE investors is more than evident - as are the geographies they must focus on for optimum returns.

Anarock data reveals that around 39 million sq ft of organised retail space is expected to enter the market between 2019-2022. Of this supply, around 71 per cent is expected to come up in tier I cities, and the remaining 29 per cent in tier II and tier III cities, Kejriwal added.