India’s retail properties see renewed interest from private equity investors

The sector accounted for the second highest share (33%) of investment inflows in Q2 2021.

According to Savills, private equity investment inflows into the real estate sector amounted to US$865 million (INR63 billion) during Q2/2021, registering a decline of 54% QoQ. 

However, Savills notes that the first half of 2021 saw about 41% of the investment inflows that the sector witnessed in the entire year 2020, indicating that investor confidence remains intact despite the pandemic-struck slow down period. 

Here’s more from Savills:

Despite the advent of remote-working, commercial office assets remained popular during Q2/2021, garnering a 40% share of the investment pie. This is backed by the resilience displayed by investable grade office assets reflected in the successful listings of the three Indian REITs. 

While occupancy levels in Embassy Office Parks REIT and Mindspace Business Parks REIT declined marginally by 1 to 2 percentage points at the end of March 2021 compared with December 2020, rents remained stable during the period. Brookfield India REIT meanwhile executed a successful IPO with an 8x subscription with strong participation from a diverse mix of marquee investors. 

Most malls in India re-opened during June-September 2020 with limited operating hours, after a period of strict lockdown restrictions due to the pandemic. During Q1/2021, consumption across investment grade retail assets recovered swiftly to pre-COVID Q1/2020 levels. The swift recovery which started in Q4/2020 can be attributed to multiple factors including an increase in mall operating hours across many cities, a resumption of food and beverage demand as well as increased spending during the festive season. 

We witnessed renewed interest in the retail sector by private equity institutional investors as the segment accounted for the second highest share (33%) of investment inflows during Q2/2021 while foreign investors CPPIB and GIC established platforms to invest US$285 million (INR21 billion) in retail assets in the cities of Kolkata, Mumbai, and Pune.