India is expected to get its first Real Estate Investment Trust (REIT) of retail assets soon as institutional investors and developers looking to monetize their rent-yielding space in shopping malls, according to JLL India.
REIT, a popular instrument globally, was introduced in India a few years ago to attract investment in the real estate sector by monetizing rent-yielding assets. It helps unlock the massive value of real estate assets and enables retail participation. At present, there are three listed REITs - Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India Real Estate Trust - on Indian stock exchanges but all these are of leased office assets.
JLL in the retail real estate segment highlighted that institutional investment in the retail sector has been picking up since 2021. More than US$ 862 mn in investments have come from 2021 (excluding portfolio deals).With quality supply in the pipeline and new malls announced by established developers, the Indian retail sector is expected to attract more institutional investors.
REITs in retail will be the next big move in the sector as institutional investors are building portfolios of superior-grade retail assets, it added. JLL India cited a few examples of institutional investors creating large retail real estate portfolios.
Nexus Malls acquired Forum Malls as part of a US$ 1.2 bn deal between Blackstone and the Prestige Group to take over the income-generating retail assets of the latter. Abu Dhabi Investment Authority-backed Lake Shore India Advisory has acquired Viviana Mall in Thane from GIC and realty developer Ashwin Sheth Group for over ?1,900 crores.
Apart, Singapore sovereign wealth fund GIC and The Phoenix Mills Ltd have entered into a strategic partnership to establish an investment platform for retail-led mixed-use assets in India. The consultant expects leasing demand in malls to expand and surpass pre-pandemic levels by 2023.
The inherent growth potential of the sector is quite robust, and institutional investment is expected to increase it further. This would bring more transparency and improvement in the operating environment of shopping malls.
On the overall supply situation, JLL said that the stock of Grade A shopping malls in the top seven cities of India (Delhi, Mumbai, Pune, Bangalore, Kolkata, Chennai, and Hyderabad) is at 90.6 mn sq ft in H1 2022. More than 50 percent of the mall stock is in Delhi NCR (29 mn sq ft) and Mumbai (19 mn sq. ft).
