Around 35% of 650 operational malls in India now meet institutional grade: Report
Bengaluru: The Indian retail real estate sector is shifting from fragmented, quantity-led growth to quality-driven institutional consolidation, with 30–35% of the country’s 650 malls now meeting institutional grade, according to a report by ANAROCK Retail.
The trend is most visible among major players such as Nexus Malls (Blackstone), Phoenix Mills, DLF, Lakeshore, Raheja Group, and Pacific. Together, they own 58 malls spanning 34 million sq. ft. and have over 45 new projects in the pipeline, which will add more than 42.5 million sq. ft. of retail space in the next three to five years.
"It is notable how quickly institutional investment is spreading beyond the metros into Tier 2 hubs," said Anuj Kejriwal, CEO & MD of ANAROCK Retail. "Chandigarh, Indore, Surat, Bhubaneshwar, and Coimbatore, with highly aspirational populations and increasing purchase power, are the new growth centres for organized retail. The Indian retail industry is driven by changing consumer expectations, global brands’ preference for standardized, and experiential spaces. However, growth also hinges on institutional investments, which means that mall assets must also appeal to private equity and REIT investors."
Grade A malls have grown from just 22% of the inventory in the top seven cities in 2015 to a projected 60% by 2027. Vacancy levels have fallen from 19% to about 9%, while rentals in Grade A properties are growing at 5–8% CAGR. In contrast, many underperforming malls face closure, repositioning, or conversion into mixed-use projects.
Despite this progress, India still lags global peers, with only 110 million sq. ft. of quality retail stock compared to 700 million sq. ft. in the US and 400 million sq. ft. in China. Yet, India’s strong urbanization trends and retail sales productivity of INR 1,200–1,600 per sq. ft. per month in Grade A malls point to massive growth potential.
The sector’s growth is also supported by GST reforms rolled out on September 22. The changes simplify the tax structure, cut compliance costs, and streamline payments, strengthening cash flows and investor confidence.
"The GST reforms, with their streamlining effect on taxation, make pricing of retail goods more transparent, and reduce tax cascading," Kejriwal added. "The result - significantly improved shopper confidence and purchasing power - will boost spending on premium and branded products. With uniform taxes across states, shoppers will benefit from more consistent pricing. With this rejuvenating effect, the new GST regime will also drive demand for experience-driven retail formats and thereby further accelerate the growth of institutional malls in India."
Between 2005 and 2015, over 250 malls were built across India during the organized retail boom. However, from 2015 to 2020, around 20–22% of these malls were either shut down, repositioned, or converted to other uses. Vacancy rates in inferior malls crossed 30–35%, leading to financial distress. Only Grade A malls recorded positive rental growth of 5–8% CAGR, while rents in Grade B and C malls remained stagnant or declined.
Looking ahead, new malls are expected to span an average of 1–1.2 million sq. ft., while 30–40% of smaller malls may be repurposed into mixed-use projects. At least two to three new retail-focused REITs are also likely to be launched soon.
