New Delhi, September 25
India's growing per capita income, a burgeoning middle class, and expanding urbanization are driving a surge in urban consumption, with the retail realty sector emerging as a key beneficiary of this trend, highlighted a report by Nuvama.
The report noted that the increase in discretionary spending, particularly in urban areas, is underlining the bullish outlook on the country's consumption growth, making retail real estate--especially malls--an attractive investment opportunity in the coming decade.
"Increasing per capita income in India, a burgeoning middle class, growing urbanisation and expanding discretionary spending underpin our bullish stance on urban consumption. Retail realty (malls) is an interesting proxy for this consumption theme" said the report.
It also highlighted that the demand for high-quality retail spaces in the country has been steadily increasing, but there remains a shortage of top-tier retail infrastructure in India. The country's per capita stock of Grade A malls is significantly lower compared to Southeast Asian nations such as Indonesia, the Philippines, Thailand, and Vietnam.
As per report this shortage is driving high demand for available space, leading to low vacancy rates and industry consolidation. For retail realty players, this is translating into robust portfolio growth and strong cash flows.
"Low vacancies and industry consolidation are driving strong portfolio growth and robust cash flows for retail realty players" the report added.
The report emphasized that several factors are expected to support and accelerate consumption growth in India over the next decade. First, the country's per capita GDP is projected to reach around USD 4,000 by the end of the decade, boosting purchasing power.
Second, the share of middle-class households is expected to grow significantly, reaching about 79 per cent by FY30. This shift in household income distribution is likely to spur demand for a wider range of products and services.
Additionally, the report stated that India's urban population is forecasted to increase from 35 per cent in 2021 to approximately 41 per cent by 2030, and further to 50 per cent by 2050. This urbanization will continue to fuel the demand for retail spaces as consumers in urban areas increasingly seek modern shopping experiences.
Another critical driver of this trend as per the report is the rise in discretionary spending, with more consumers shifting towards premium brands and high-quality products. This growing preference for premium goods is set to further bolster the retail sector, with malls playing a crucial role in providing a platform for both international and domestic premium brands to connect with consumers.