Real Estate

Retail investments in India doubled in the last two years: Report

Our Bureau Mumbai | Updated on May 20, 2019 Published on May 20, 2019

The PE (private equity) investments into the Indian retail sector has doubled at $1.2 billion in the last two years on back of relaxation of FDI policies — 51 per cent FDI in multi-brand retail and 100 per cent FDI in single-brand retail under the automatic route (against the previous 49 per cent), as per a report by real-estate and retail consultancy firm ANAROCK.

In its “Private Equity in Indian Real Estate” report, ANAROCK stated that the total private equity inflows in the Indian retail sector between 2015-2018 stood at $1.84 billion, and of this $1.2 billion were pumped in between 2017-2018 alone.

US and Canada-based PE funds together invested more than $1.13 billion into the retail sector in the Asia’s third largest economy, where the retail industry, riding on increasing consumerism, is expected to touch $3,600 billion by 2020.

Focus on smaller cities

Tier II and III cities were high on the radar of the PE investors, who in the last four years infused almost half of their total investments into the retail sector in cities like Amritsar, Ahmedabad, Bhubaneshwar, Chandigarh, Indore and Mohali, it added.

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 & III cities have performed as well as, if not better than, their Tier I 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.”

US-based funds like Blackstone and Goldman Sachs invested more than $1 billion funds into the Indian retail sector between 2015 and 2018. Of this, more than $700 million went into Tier II and III cities that are growing faster than the metros due to a shortage of organised retail despite the rising disposable income and aspiration-driven consumption.

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, approximately 71 per cent is expected to come up in Tier I cities, and the remaining 29 per cent in Tier II and III cities."

Published on May 20, 2019

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