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Retail trading values are projected to see a 14-15% increase in FY2024 and a 10-12% rise in FY2025, driven by robust consumer demand. ICRA anticipates a 9-10% YoY growth in rental income for mall operators in FY2024 and 8-9% in FY2025. This growth is attributed to healthy occupancy rates, projected increases in trading values, and rental escalations. In H1 FY2024, ICRA's sample set experienced an 8.4% YoY increase in rental income.
ICRA maintains a stable outlook for retail mall operators. FY2023 witnessed a strong rebound for retail mall operators in terms of footfalls and trading values and that trend persisted into H1 FY2024. Projected growth in footfalls, increased spending driven by premiumization, and robust urban consumption lead ICRA to estimate a 14-15% increase in trading values for FY2024 and a 10-12% growth in FY2025.
As of September 30, 2023, the total grade A retail mall supply for the top six markets reached approximately 105 million square feet (msf), with expectations to increase to around 116-118 msf by March 2025. Delhi NCR contributes the highest supply at 30%, followed by Bengaluru (20%), MMR (17%), Pune (14%), Hyderabad (13%), and Chennai (6%). ICRA foresees Delhi NCR, Pune, and Hyderabad accounting for 85% of new supply in FY2025, with 10% of the upcoming supply already pre-leased as of September 2023.
Anticipated new supply in FY2024 and FY2025 across the top six cities in India is 9-10 msf and around 6 msf, respectively. Although net absorption was healthy at 3.2 msf in H1 FY2024, vacancy levels rose slightly to 20% as of September 2023 due to the recent operationalization of 5.6 msf of new supply. ICRA expects occupancy levels to remain at 81-82% as of March 2024 (81% in the previous year) and improve to 82-83% by March 2025.
Over the last four quarters, the Private Final Consumption Expenditure (PFCE) component of the Indian GDP has been on the rise, fuelled by increased household spending. The RBI's Consumer Confidence Survey from September 2023 indicates buoyant household spending over the past year. This is likely to continue over the next 12 months, supporting retail sales for tenants of mall operators.
In conclusion, the outlook for the retail sector in India, specifically focusing on mall operators, appears optimistic and growth oriented in the upcoming fiscal years. The analysis provided by ICRA paints a picture of resilience and recovery on the lines of the strong rebound observed in FY2023, sustained by increased footfalls and trading values.
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