Real Estate

Amidst tepid consumer spends, retail-focused PE inflows touch $970 mn in 2019

Anil Urs Bengaluru | Updated on February 11, 2020 Published on February 11, 2020

Apart from the top cities, Tier 2 & 3 cities are also on the radar of many PE funds

Amidst tepid consumer spends in India, retail real estate, which includes properties such as malls, saw focussed Private Equity (PE) inflows touching $970 million in 2019 — accounting for 19 per cent of the $5 billion invested in the overall Indian real estate sector.

“PE inflows into Indian retail hit a new high in 2019, in the five years between 2015 to 2019,” said Shobhit Agarwal, MD & CEO – Anarock Capital.

“Back in 2018, retail inflows stood at a mere $355 million, comprising just 7 per cent share of total PE funds. Before 2019, year 2017 saw the second-highest PE inflows in retail at $890 million. Interestingly, in 2019, Delhi-NCR received the maximum PE inflows of about $610 million — a massive 63 per cent share of the total retail funds into Indian realty during this period,” explained Agarwal.

“While commercial offices topped the funding charts, the retail sector witnessed the second-highest investments from various PE funds in 2019,” he added.

Investors are betting big on select Grade A mall projects that have high probabilities of profitability. Despite the consumption slump, many malls are doing excellent business today, and investors are keenly vying for such projects.

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

Apart from the top cities, Tier 2 & 3 cities are also on the radar of many PE funds, which see these cities actively driving retail going forward. At least 36 per cent (nearly $1 billion) in retail-focussed funds went to cities like Ahmedabad, Amritsar, Bhubaneshwar, Chandigarh, Nagpur and Mohali.

In 2019, Anarock Capital was instrumental in Virtuous Retail South Asia (a JV between Singapore’s PE firm Xander Group and Dutch institutional investor APG), concluding a $100 million deal with TRIL for two retail malls, one each in Nagpur and Amritsar.

Overall PE inflows in Indian retail touched $2.8 billion in the five years between 2015 and 2019 — fairly close to the residential segments’ total PE inflows of $3.4 billion in this period, revealed Anarock Research.

Cities Attracting PE Investors

Delhi-NCR received the maximum retail-focused PE inflows between 2015-2019 – more than $750 million. The Mumbai Metropolitann Region was second, with $410 million funnelled into retail over the last five years. Pune saw PE inflows of nearly $150 million in the retail segment.

Bengaluru saw total PE investments of $275 million since 2015 in retail. Hyderabad and Chennai together attracted close to $230 million during the same period. Chandigarh was a major funding target for US-based Blackstone, which invested $340 million in a single large deal in 2017.

Ahmedabad also drew the attention of PE investors and saw its retail sector draw nearly $220 million in the last five years.

Published on February 11, 2020
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