India's retail sector is witnessing a major shift, with estimates suggesting the growth of more than 16.6 million square feet of new Grade A mall space in India's top seven cities between 2025 and 2026, a report published on Tuesday said.
This increase in retail space is being fuelled by rising consumer demand and strong retail leasing activity, which marks what industry experts call a "golden era" for the industry, as per information provided by Anarock Research.
Hyderabad and Delhi-NCR will be spearheading this growth, accounting for almost 65% of new mall space. This trend indicates a move towards high-growth consumption centers in these markets.
Growth is part of a broader retail real estate pipeline, with over 40 million square feet of new retail area slated to go on line around India through the year 2029.
Anuj Kejriwal, MD and CEO of Anarock Retail, described how the boom in mall construction is a reaction to the recent lack of quality retail space. He added that, in 2022, the prime cities witnessed merely 2.6 million square feet of fresh space, whereas leasing took place at 3.2 million square feet. Likewise, in 2023, though 5.3 million square feet of fresh space was introduced, leasing demand exceeded this amount at 6.5 million square feet.
The supply deficit came even more clearly into focus during 2024, as part of the cause was delays in approval procedures that were associated with state and general elections. Kejriwal noted that a mere 1.1 million square feet of new mall area came into the market during that year, when leasing demand held steady at 6.5 million square feet.
Even with the large new supply due in the next two years, there is no near-term oversupply issue. The report expects 12.6 million square feet of mall leasing to occur in the nation's leading cities in 2025 and 2026, as a result of strong demand from developers and retailers, driven by positive consumer attitudes and the continued requirement for organised retail space.
A critical driver of this demand is the entry of more than 60 global retail chains into India during the last four years across segments such as fashion, electronics, lifestyle, and food & beverages. They want to make their presence felt in busy malls and trendy high streets.
Consequently, vacancy levels at malls, which reached 15.5% in 2021, are likely to normalize to about 8.2% by 2025 and 8.5% by 2026.
This retail expansion is not limited to the big metro cities. Tier 2 and Tier 3 cities are becoming key retail hubs, driven by rising disposable incomes, better internet connectivity, and the rising uptake of e-commerce. Indeed, small cities today dominate India's online retail market.
The number of Indian online shoppers has increased from 140 million in 2020 to close to 260 million in 2024, with the anticipation that it will hit 300 million by 2030 and 700 million by 2035, according to the report.
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