Indian retail mall operators' rental income to see steady growth: ICRA

The first half of FY24 has already shown promising signs, with rental income for ICRA's sample set increasing by 8.4 per cent YoY. This positive trend is largely attributed to the robust recovery of the retail sector, buoyed by increased consumer spending, as per ICRA.

Significantly, the private final consumption expenditure, a crucial component of the Indian GDP, has shown a consistent uptick over the last four quarters. This increase is primarily due to higher spending by households. The Reserve Bank of India’s Consumer Confidence Survey from September 2023 indicates a buoyant trend in household spending over the past year. The spending has been distributed across essential and non-essential items, with expectations of continued growth over the next 12 months. This consumer confidence is poised to bolster retail sales, benefiting tenants of mall operators.

The analysis further highlights the current state and future prospects of grade A retail mall supply in India's top six markets. As of September 30, 2023, the total supply stood at approximately 105 million square feet (msf), with an expected rise to around 116-118 msf by March 2025. The Delhi National Capital Region (NCR) leads in supply contribution at 30 per cent, followed by Bengaluru (20 per cent), Mumbai Metropolitan Region (MMR) (17 per cent), Pune (14 per cent), Hyderabad (13 per cent), and Chennai (6 per cent). Notably, Delhi NCR, Pune, and Hyderabad are expected to account for 85 per cent of the new supply in FY25. About 10 per cent of the upcoming supply for FY25 is already pre-leased as of September 2023.

In terms of new supply across the top six cities, projections for FY24 and FY25 are approximately 9-10 msf and 6 msf, respectively. Despite the healthy net absorption of 3.2 msf in H1 FY24, the vacancy levels have marginally increased by 100 basis points to 20 per cent as of September 2023. This rise is attributed to the introduction of new supply amounting to 5.6 msf, which is yet to reach full operational capacity. However, ICRA anticipates the occupancy levels to sustain at 81-82 per cent as of March 2024 (previous year: 81 per cent) and improve further to 82-83 per cent by March 2025.

Fibre2Fashion News Desk (DP)