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NEW DELHI : Retail sales in Indian malls will grow at a compound annual growth rate (CAGR) of 29% in FY22-28 to touch $39 billion by FY28, according to estimates by real-estate consultancy Knight Frank.

Shopping malls suffered a major setback due to their sudden closure during covid-19 lockdowns resulting in severe loss of consumption in FY21. As a result, retail sales in Indian malls across the top 8 cities grew 3% to reach $8 billion in FY22. In FY23, Knight Frank expects retail sales in malls to surpass pre-covid levels to reach $11 billion, the firm said in a report titled Reinventing Indian Shopping Malls released Tuesday.

However, as the severity of the pandemic declines and malls draw shoppers back to stores and food courts, the mall environment has been “evolving“ with leading developers repositioning destination malls as safe havens for shopping and entertainment. Consequently, Grade A malls, which form 19% or 52 of the 271 malls in India, continue to perform well, beating pre-pandemic consumption, footfalls and occupancy levels.

In December 2019 India had 255 malls; the number has moved up to 271 post-covid. Due to higher vacancy in some Grade B and C malls, developers are re-evaluating leasing options for alternative uses, the report said.

“The retail real estate sector has reached a new level of maturity where smaller sized and lower grade developments are giving way to Grade A malls. The existing Grade A malls have over 95% occupancy which is indicative of the demand for quality real estate in this segment. Given that retail malls are experiential, more of the future developments will want to create destinations," said Shishir Baijal, chairman and managing director, Knight Frank India.

India has a total mall stock of 92.9 million sq ft., spread across the top eight markets—Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, National Capital Region (NCR) and Pune. As of H1 2022, Grade A malls, with high occupancy, strong tenant mix, good positioning and active mall management contributed 39% to the overall mall supply.

The report pointed to a shift in formats that includes developers eyeing more neighbourhood malls built near residential clusters.

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