Retail-Driven Real Estate - Unlocking Growth Through REITs in India

In a bid to harness the promising potentials that lie in the retail sector of India, realtors are increasingly pivoting towards the development of retail-driven assets under singular ownership.

This strategic shift is propelled by the numerous advantages that come with Real Estate Investment Trusts (REITs), which have ushered in a new era of transparency and efficiency in transaction and management structures.

Mumbai, a bustling hub in this evolving landscape, stands as a testament to the changing dynamics in India's retail real estate sector.

A Paradigm Shift in Retail Real Estate

The Indian retail sector is currently riding a wave of unprecedented growth, characterized by innovation in the built environment, deeper connections with consumers, and expansion into previously untapped regions, including tier II and III cities. Rahul Arora, the Head of Office Leasing Advisory and Retail Services for India at JLL, affirmed that the focus has now shifted towards the development of investment-grade assets with a unified ownership structure. This approach not only facilitates greater asset monetization but also allows for meticulous management of various parameters including zoning and mall management.

Unveiling the Potential of REITs

Earlier this year, India's public markets welcomed the first retail assets-led REIT, the Blackstone-backed Nexus Select Trust. A monumental success, it boasted 9.9 million square feet of rentable space spread across 14 cities and experienced a remarkable 5.5-fold oversubscription, thereby cementing confidence in the sector. This follows the successful launch of three office property-led REITs, signaling a positive trajectory for the retail sector in India.

Developers are now channeling investments into enhancing retail assets, implementing avenues of amusement, leisure, and F&B, fostering a revamped brand experience that resonates with the tech-savvy millennial generation.

Forecasting a Bright Future

As we look towards the latter half of 2023, a surge in retail-driven real estate is anticipated in India, with a supply of over 38 million square feet projected to be unveiled by the end of 2027. Remarkably, more than half of the potential listings, which amount to approximately 44 million square feet, are nestled in the vibrant regions of Mumbai and NCR-Delhi, positioning them as the epicenters of this retail revolution.

Samantak Das, JLL's Chief Economist and Head of Research and REIS, India, highlighted that Delhi-NCR is expected to spearhead the upcoming mall supply with a 31% share, trailed by Chennai and Hyderabad with 16% and 14% respectively. Moreover, institutional participation is noted in about 18% of this upcoming supply, translating to a substantial 6.7 million square feet.

A New Dawn for Tier II and III Cities

As the retail sector continues to flourish, tier II and III cities are emerging as significant growth corridors. These areas are attracting the attention of notable developers, global conglomerates, and institutional investors who are keen on unveiling high-quality retail developments. The retail sector is poised to witness a fresh wave of listings, facilitated by the global institutional funds collaborating with key developers to establish mall platforms.

Conclusion

The Indian retail sector stands on the cusp of a transformative phase, with an influx of institutional investments and an enhanced quality supply pipeline. The synergy between REITs and retail real estate is set to redefine the retail landscape in India, paving the way for a prosperous and dynamic future.