Retail realty may attract $80 m PE investment

Sharath Chowdary | The Dollar Business Bureau

PE investment into retail properties is expected to double in CY2016. According to real estate consultant JLL India, it’s is likely to grow to $75-80 million in CY2016, as compared to $39 million in CY2015. The consultant said, “Retail real estate sector has been constantly evolving in response to the changing consumer preferences. It will result in emergence of stronger retail real estate players, who may manage to get private equity (PE) investment in the coming years.”

Former National President of Confederation of Real Estate Developer's Associations of India (CREDAI) C Shekar Reddy, told The Dollar Business, “As more urban population adopt western culture, change life styles has increased purchasing power and availability of credit facilities. So retail is a sector that is doing well in India.” He continued, “More international brands will enter Indian retail real estate market due to economic stability, conducive environment for investment, liberalisation of the Foreign Direct Investment (FDI) policy, and improved consumer sentiments.” This will improve logistics and infrastructure in the country, and further, consumers may get foreign products at competitive prices.

Anuj Puri, Chairman & Country Head, JLL India, said, “It is highly anticipated that the retail sector can attract huge investments due to the various initiatives taken by the government. In 2015, single-brand retail saw relaxation in sourcing norms, which is expected to rack up FDI inflows in the future. Moreover, in the FY2016-17 Budget, cent percent overseas capital was allowed in processed food retailing through the Foreign Investment Promotion Board (FIPB) route.”

Puri further commented, “The FDI inflow in retail trading has increased to $70.75 million during October 2014 and September 2015. In 2016, PE may also go into select mall investments, especially in under-represented markets, or for buyout of mature assets. Alongside, as quality mall space is coming up with strong pre-commitments, which indicates that retailers will continue to remain bullish about the long-term India consumption story.”

“However, the lack of quality retail space will continue to cast its shadow in 2016. Thus, retailers will have to redo their real estate strategy and adopt a flexible approach, customised to different micro-markets. Investment by both home-grown and international brands will strengthen in tier-II and tier-III markets as they expand beyond tier-I cities. Investment by large players will also be seen in 2016,” he added.