November 30, 2023: The retail mall space in India is expected to grow by 30-35 million square foot (msf), over one-third of the current stock, during the next 3-4 years owing to a strong recovery in retail sales, according to a report by rating agency CRISIL. As per the report, the retail recovery is expected to sustain, as broad-based consumption across geographies as well as sectors fortifies demand resilience. The revenue of mall owners for FY24 is estimated at 125% of the pre-pandemic level.
According to Anshuman Magazine, chairman and CEO (India, South-East Asia, Middle East and Africa) at CBRE, in the next two years, at least 10-12 msf of Grade A shopping mall space is expected to become operational, as cited by media reports. As per CRISIL’s report, another factor for the increase in demand for mall space is the jump in consumption in tier 2 cities. These cities are garnering around 25% of the total upcoming mall area. The expansion in the mall area has also been attributed to an increasing interest by investors such as private equity, global pension funds and sovereign wealth funds. CRISIL said that 15-20% of the investment in new supply will be led by these investors.
Retail mall is expected to attract investment of more than Rs 20,000 crore over the next 3-4 years. Malls in India are also witnessing high occupancy of 95% due to the return of retail demand. Mall owners are likely to report a second consecutive year of high performance this year, with revenue growth of 7-9%, following the robust 60% growth in FY23.
Sectors such as jewellery, restaurants, sports and electronics have recovered well above their pre-pandemic levels and maintained double-digit growth this fiscal. Some sectors such as apparel and footwear, have also seen strong recovery, albeit with some tapering this fiscal. Multiplexes, which are typically strong footfall drivers for malls, are also seeing healthy performance with improved content availability.
CRISIL’s report added that high interest from investors, along with comfortable balance sheets, will keep the credit risk profiles of mall owners stable despite the sizable capital expenditure (capex) plans. Moreover, the ratio of debt to earnings before interest, taxes, depreciation and amortisation (EBITDA) is expected to be three times this year, better than 3.2 times last year. The debt service coverage ratio (DSCR) will remain strong at approximately 1.8 times in FY24, similar to FY23 and a significant improvement from a DSCR of approximately 1.2 times in FY22.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
