India's Retail Sector Set to Draw USD 3.5 Billion as Western Malls Decline

India's retail real estate sector is positioned to attract over USD 3.5 billion in investments over the next three years, according to ANAROCK Research & Advisory, as global capital shifts away from struggling US and European shopping centres.

The investment surge reflects strong consumption growth, severe undersupply of Grade-A mall space, and rising foreign brand interest, establishing India as a global retail destination while Western markets face significant challenges.

Western Markets Face Structural Challenges

Shopping malls across the United States and Europe continue to grapple with declining visitor numbers, oversupply, and widespread store closures. Since 2020, the US has recorded a net closure of nearly 1,200 mall stores, with vacancies forcing nearly 40 percent of empty malls to be rezoned or repurposed.

This trend highlights what industry analysts describe as an existential crisis for traditional shopping centres in mature economies, creating opportunities for emerging markets like India.

India's Retail Renaissance

In stark contrast, India is experiencing a retail resurgence driven by fundamental economic strengths. Anuj Kejriwal, CEO of Retail Leasing and Industrial & Logistics at ANAROCK Group, notes that over 88 foreign brands have entered the Indian retail market between 2021 and the first nine months of 2025.

"Several more brands are actively scouting for space in the severely constrained Grade-A mall segment," Kejriwal stated, highlighting the sector's growing international appeal.

Supply Constraints Drive Investment Appeal

India's extreme undersupply of organised, Grade-A retail space represents one of the strongest drivers of investor confidence. ANAROCK data reveals that India's per capita retail stock remains among the lowest globally, with Tier-1 cities offering just 4-6 square feet per person.

Tier-2 and Tier-3 cities have only 2-3 square feet per capita, while Grade-A mall space stands at a mere 0.6 square feet per capita. By comparison, the United States averages close to 23 square feet per capita, while China exceeds 6 square feet.

This supply constraint, combined with India's per-capita income nearly doubling over the last decade, has created a demand-supply mismatch rarely seen in global retail markets.

Strong Operational Performance

Most Grade-A malls in India operate at 95-100 percent occupancy, often maintaining long waitlists for prime zones. Leasing cycles now outpace construction cycles, a phenomenon rarely observed in global retail markets.

Leading Indian malls record weekday visitor numbers exceeding 20,000, rising beyond 40,000 on weekends, demonstrating robust demand dynamics that support sustained investment returns.

Evolving Consumer Behaviour

India's retail transformation reflects changing consumer behaviour as the country progresses toward becoming a USD 6 trillion consumption economy by 2030. Indian shopping centres have evolved into lifestyle destinations, with entertainment and food & beverage accounting for 30-35 percent of visitor traffic.

This diversification helps malls remain resilient even as e-commerce grows, with online penetration still around 8 percent, far below the 20 percent-plus levels in the US and China.

Investment Returns and Market Structure

Indian Grade-A malls typically deliver 14-18 percent internal rates of return, nearly double the yields available in many Western markets. Stable rental escalations, revenue-sharing models linked to consumption growth, and consistently low vacancies provide investors with both yield visibility and long-term growth potential.

Although India has more than 600 operational malls, fewer than 100 meet institutional investment benchmarks, making quality assets highly competitive among global investors.

Market Outlook

The establishment of Nexus Select Trust REIT in 2023, with a portfolio of 19 malls housing over 1,000 brands and generating around ₹1,600 crore in annual net operating income, has demonstrated retail as a transparent and professionally managed asset class in India.

ANAROCK expects at least two more retail REITs to debut in the Indian market by 2030, further deepening institutional participation and providing additional investment vehicles for global capital.

Retail leasing in India surged nearly 70 percent year-on-year in the first half of 2025, while new mall supply expanded by over 160 percent, reinforcing India's position as one of the world's most compelling retail real estate markets.