After almost 6 years of inactivity starting 2009, retail assets have started attracting Private Equity (PE) investments for the past 3 years.
The rise in interest is due to improvement in the country’s economy post-2014 which has translated into rising consumer confidence and hence, consumer spending.
With proper mall management strategies, one can generate good revenue in rising economy. This has resulted in higher PE investments in the country’s retail assets. Also, the average investment size has increased multifold showcasing the increase in investor confidence.
Further, with the REITs opening up, the investors have another option to monetize their assets and they can strategies well and create a portfolio that can enhance their overall valuation.
While the consumer spending has increased, it has not restricted to only metros and gone to TIER II cities as well. With fewer options to spend, consumers in TIER II cities love the mall culture even more.
Further, unlike real estate prices, pricing of branded goods doesn’t change with a change in locations. Hence, good mall management can generate good revenues for the malls. This has resulted in investors focusing beyond top 7 cities.
Another reason for venturing into TIER II cities is the possibilities of better bargaining compared to limited scope in metros. We believe, with the economy doing well and so are the malls, interest in good quality retail assets is here to stay.
Shobhit Agarwal is MD & CEO – ANAROCK Capital.