India's Retail Real Estate Set to Attract $3.5 Billion in Investments Over Next Three Years

NEW DELHI: India’s retail real estate sector is expected to attract investments of about $3.5 billion over the next three years, as global capital increasingly pivots towards the country amid mounting stress in mall assets across Western markets, according to Anarock Research.

While shopping malls in the US and parts of Europe grapple with declining footfalls and store closures, India is witnessing a sharp rise in demand for organised retail space, driven by a young consumer base, rising incomes, and a chronic shortage of quality mall assets.

The US has recorded a net closure of nearly 1,200 mall stores since 2020, even as new store openings rose sharply over the past two years. In contrast, India has seen sustained retailer expansion, with more than 88 foreign brands entering the domestic market between 2021 and the first nine months of 2025, many of them actively scouting for space in Grade-A malls.

A key driver of investor interest is the severe undersupply of quality retail real estate in India. Per capita retail stock in Tier I cities stands at just 4-6 sq ft per person, while Tier II and III cities have only 2–3 sq ft per capita. Grade-A mall space is estimated at barely 0.6 sq ft per capita, compared with nearly 23 sq ft in the US and over six sq ft in China.

This supply gap has translated into near-full occupancies across existing high-quality malls, with most Grade-A assets reporting 95-100% leased space and waitlists for prime zones. Industry data suggests that leasing cycles in key retail markets are currently outpacing construction timelines, reflecting the depth of unmet demand.

India’s consumption story is also underpinning retail growth. The country is projected to become a $6 trillion consumption economy by 2030, supported by favourable demographics, urbanisation, and income growth. Unlike Western markets, Indian malls function as social and lifestyle destinations, with entertainment and food & beverage together accounting for 30–35% of footfalls. Average daily footfalls in large malls often exceed 20,000 on weekdays and rise beyond 40,000 on weekends.

Institutional investor appetite for retail assets has strengthened over the past few years, aided by the emergence of professionally managed platforms and REIT structures. Of the more than 600 operational malls in India, fewer than 100 meet institutional investment benchmarks, intensifying competition for top-tier assets.

E-commerce penetration in India remains relatively low at around 8%, compared with over 20% in markets such as the US and China. Physical retail continues to play a central role, with brands increasingly adopting a ‘phygital’ strategy, using offline stores to build trust and experience while leveraging online platforms for reach.

Grade-A retail assets in India typically offer internal rates of return (IRRs) of 14-18%, nearly double the yields available in several Western markets. Stable occupancies, rental escalation clauses, and revenue-sharing models linked to consumption growth have made Indian malls an attractive proposition for global capital seeking long-term income and growth.