With the economy opening up, the retail malls have witnessed a sharp recovery in their operational metrics since August 2021 and have touched 80 percent of the pre-covid level in the second half of the financial year 2021-2022.
Resumption of multiplexes clubbed with the high vaccination coverage led to the rebound of the retail malls, a report by ICRA said.
The report said that the debt service coverage ratio, which was less than 1x for two consecutive years (FY2021 & FY2022) is expected to improve to 1.10-1.15x in FY2023 with the improved rental recoveries.
As per an ICRA research report, the trajectory has largely sustained in H2FY2022 barring a brief pause due to Omicron. The report said that retail trading values in Q3 of FY2022 reached the pre-covid levels and surpassed the pre-covid trading values in Q4 of FY2022. The report anticipated that the footfalls at retail malls will reach pre-Covid levels in Q3 FY2023.
Commenting on the rental income for retail malls, Anupama Reddy, Vice President & Sector Head, Corporate Ratings, ICRA, says, "The rental income improvement is faster post-second wave with recovery at 74% for Q2 FY2022 (as against 34% for Q2 FY2021) and reaching 102% of pre-Covid levels in H2FY2022.
"In FY2022, the rental income in ICRA’s sample set (eighteen malls totalling 11.7 million sft spread across seven states) witnessed an increase by around 56%, reaching around 80% of pre-Covid levels."
Reddy further said that there was an addition of new retail space of around 11 msft in FY2021 and FY2022 for the aggregate of six cities - Delhi-NCR, Mumbai, Bangalore, Hyderabad, Chennai and Pune.
"However, the incremental space absorption was only around 4 msft during this period resulting in a significant increase in the vacancy levels to 23% in FY2022 from 18% in FY2020. On a same-store basis, the rental income is expected to increase by around 30% in FY2023 and is likely to surpass FY2020 levels by around 4%-6%. With the normalcy in the trading values, the occupancy is expected to improve in FY2023," said Reddy.
