PE investment into Indian retail real estate likely to pick up in 2021

Bengaluru: Private equity investment into Indian retail real estate assets is expected to pick up in 2021 with global funds like GIC, Blackstone, Warburg-Runwal, and Lakeshore showing interest in the sector.
As per ANAROCK Research, 2019 saw total PE investments of approx $968 million in retail real estate. However, in 2020 retail real estate was one of the worst affected due to COVID19 which in-turn affected overall PE investments in the retail sector.

“While there are various PE investors considering the retail space presently, meaningful investments are likely to take place once the sector shows signs of bouncing back. And year 2021 looks quite promising with a number of investments in the pipeline,” said Shobhit Agarwal MD and CEO Anarock Capital.

Some of the retail investments that have either closed or are likely to close include Blackstone-Prestige Group portfolio deal including 8 malls and GIC-Phoenix Mills entering into an agreement to develop retail led mixed-used development platform. Additionally, Warburg-Runwal and Lakeshore-ADIA platforms are now evaluating various assets in the retail space.

“Indian consumption will continue to grow in the long-term in line with economic growth. The retail industry, like many others, have exhibited tremendous resilience, and even got itself a revamp with new strategies, and re-aligned themselves to the changing consumer behaviours and the evolving business environment. We are aggressively looking at retail opportunities both in greenfield and brownfield space,” said Vrushank Mehta, Chief Investment Officer, R Retail Ventures, a Warburg Pincus and Runwal alliance.

In the largest real estate investment platform transaction concluded last year, Warburg Pincus entered into an alliance with Runwal Group to invest $1 billion in retail-led mixed-use development across the country. Under this venture, Warburg and Runwal are looking to build a portfolio of 15-20 retail-led properties in tier-I and II Indian cities over the next five years.

“We are closely monitoring the existing portfolio and looking at some acquisition as developers are looking to deleverage balance sheet by selling income generating assets,” said a fund manager who did not wished to be quoted.

Some of the large funds raised to invest in the retail segment includes APG-Xander Rs 3,000 crore retail vehicle and CPPIB-Phoenix Mills Rs 1,662 crore fund.

As per ANAROCK Research, net absorption in Grade A malls in top 7 cities stood at approx. 8.5 mn sft. area in 2019 which dropped by nearly 70-80% in 2020. Among the cities that added the new mall supply include Gurgaon, Delhi, Lucknow and Bengaluru. This new mall supply was much less than the previously predicted numbers. Before COVID-19-infused lockdown in March in India, new supply of approx. 54 new malls was expected to be added in 2020 spread over nearly 22.2 mn sft. area.