India's Retail Sector Poised for $3.5 Billion Investment Surge by 2026

India's Retail Growth Amid Global Challenges

Mumbai, Dec 17: India is on a trajectory to evolve into a $6 trillion consumption economy by 2030, with expectations of attracting over $3.5 billion in capital investments within the retail sector over the next three years, as shopping malls in Western nations face significant challenges, according to a recent report.

Since 2020, the United States has seen the closure of nearly 1,200 mall stores, leading to a situation where almost 40% of vacant malls are undergoing rezoning or repurposing. In contrast, India is witnessing a retail revival fueled by robust consumer demand and increasing confidence from institutional investors, as highlighted by Anarock's report.

“Current data indicates that Indian malls are projected to receive over $3.5 billion in capital inflows in the coming three years. Additionally, more than 88 foreign brands have entered the Indian retail landscape, with plans for aggressive expansion. Numerous global brands are also looking to establish a presence in the limited Grade-A assets available,” stated Anuj Kejriwal, CEO of Retail Leasing and Industrial and Logistics at Anarock Group.

India boasts over 600 operational malls, yet fewer than 100 meet the institutional standards that attract global investments, leading to fierce competition for premium assets.

Furthermore, India's per capita retail space is among the lowest globally, with tier 1 cities offering only 4 to 6 square feet per person, while tier 2 and 3 cities provide 2 to 3 square feet, and Grade A mall space is merely 0.6 square feet per capita.

In comparison, the US averages nearly 23 square feet, and China surpasses 6 square feet.

This disparity, coupled with India's per capita income nearly doubling in the last decade, has resulted in an unprecedented demand-supply imbalance in the global retail sector, according to Kejriwal.

Grade-A malls are experiencing near-full occupancy rates, with figures ranging from 95% to 100%, and long waiting lists for prime locations. Rental growth has consistently exceeded pre-pandemic levels, with leasing cycles now outpacing construction cycles—a rarity on a global scale.

Unlike their Western counterparts, Indian malls serve as lifestyle hubs, emphasizing entertainment, dining, and social experiences. Major malls see daily foot traffic exceeding 20,000 on weekdays and surpassing 40,000 on weekends.

Food and beverage (F&B) and entertainment sectors now contribute to 30-35% of foot traffic, creating a resilient retail environment that remains largely unaffected by the online retail challenges facing Western malls.

One of the most appealing aspects for global investors is that Indian malls have not succumbed to the pressures of e-commerce; rather, they are thriving alongside it.

With e-commerce penetration in India at around 8%, significantly lower than the 20%+ levels in China and the US, many leading direct-to-consumer brands report that offline sales conversions are 2-3 times higher than online. This indicates that physical retail continues to hold significant relevance in the digital era, as noted in the report.

“This positions India uniquely among the world's foremost retail markets,” Kejriwal concluded.