India may attract $80 million PE investment in Retail Real Estate: JLL

India is expected to attract $75$80 million of private equity (PE) investment in the retail real estate sector in 2016, says property consultant JLL India. (Economic Times Bureau)

The foreign direct investment (FDI) inflow into retail trading has increased between October 2014 and September 2015 to $70.75 million, the property consultant said in its latest report on Thursday. The anticipation over private equity inflows comes on the back of economic stability coupled with liberalisation of the FDI policy and an improvement in the consumer sentiment. This is expected to help global brands witness conducive environment for investment into Indian retail as well as retail real estate sectors.

The country is also witnessing a steady rise in shoppers’ desire to consume foreign brands due to increased brand awareness. The entry of more and more global brands like H&M, Wendy’s brands will result in an increasing need for development of worldclass malls, having superlative designs and ambience, says Anuj Puri, chairman and country head, JLL India. “This will lead to emergence of stronger retail real estate players, who may manage to get private equity (PE) investment in the coming years.” JLL said the PE investments were largely confined to a few retail players in India.

In 2015, PE investment into retail properties was $39 million, and in 2016, it is expected to be in the range of $7580 million. In 2016, PE may also go into select mall investments, especially in underrepresented markets or for buyout of mature assets, the report said. The property consultant said thanks to the relaxation of sourcing norms, singlebrand retail companies will find more reason to explore the Indian market and also that the technologyled retail will start entering in single brand retail store category in 2016. It also feels that as quality mall space is coming up with strong precommitments, retailers will continue to remain upbeat about the longterm India consumption story. They are already starting to experiment with the formats, sizes for the same brands adapting to markets as they start moving up the value chain. At the same time, the lack of quality retail space will continue to cast its shadow in 2016.

In order to stay afloat, retailers will have to redo their real estate strategy and adopt a flexible approach customised to different micromarkets, says JLL. Investment by both homegrown and international brands is likely to strengthen in tierII and tierIII markets as they expand beyond tierI cities. Investment by large players will also be seen in 2016. In 2015, singlebrand retail saw relaxation in sourcing norms, which is expected to rack up FDI inflows in the times to come, views JLL. Moreover, in the Budget 201617, 100% overseas capital was allowed in processed food retailing through the Foreign Investment Promotion Board (FIPB) route.