Mall operators are expected to clock a healthy revenue growth of 12-14% this fiscal, building on the 14%1 surge last fiscal, and propelled by a ramp-up of malls acquired over the past two fiscals, planned addition of new ones2 and standard annual escalation in rentals. The momentum is likely to persist next fiscal as well with revenue growing in double digits because of similar drivers.
The rationalisation and reduction of goods and services tax (GST) rates, combined with a sustained economic growth, benign inflation, lower interest rates and an above-normal3 southwest monsoon are expected to stoke consumption and, in turn, income from revenue share accounting for 10-15% of overall revenue of mall operators.
Overall occupancy will further improve and remain in the vicinity of 94-95% this and next fiscal after rising 350 basis points (bps) to 93.5% last fiscal. This will also be driven by operators maximising occupancy in malls commissioned or acquired over the past two fiscals.
Sustained growth in rental income driven by improving occupancy, along with healthy balance sheets should keep credit profiles stable (see chart in annexure).
Our analysis of 35 Grade A malls in 11 Tier 1 and 2 cities, housed under 35 entities (including special purpose vehicles under one real estate investment trust [REIT]), indicates as much. These malls, spread over 25 million square feet (msf) of retail space, account for a ~third of the Grade A malls in India.
Says Gautam Shahi, Director, Crisil Ratings,
“Assets added via organic and inorganic routes have been a growth driver for large mall developers and REITs. Mall operators in our sample set have increased their retail space by 3.0 msf in two fiscals through 2025, mainly in Tier 2 cities, as part of their growth and diversification strategies. Another 4.5-5.0 msf is expected to be added over this and next fiscal, which should drive annual revenue growth up ~400 bps. These factors and strong occupancy will enable sustained revenue ascend over the medium term.”
Lower interest rates, income tax relaxations and an above-normal monsoon have meant consumption growth at retail malls rose to ~7% in the first half of this fiscal vs 4% in the same period last fiscal. The momentum is likely to continue with the reduced GST boosting consumer sentiment, footfalls and consumption across key tenant categories, such as apparel, footwear, consumer durables, and food and beverages (which account for nearly two-thirds of leased area and rentals of malls).
While the direct financial benefit of the GST reduction and rationalisation will be modest for mall operators themselves, they will gain from continuing high occupancy and improved rental realisation on new leases—as indicated by a 500 bps increase this fiscal for our sample set driven by the potential for mark-to-market adjustments over the medium term. The remaining growth is expected from standard lease escalations.
This will also drive sustained healthy operating efficiency, with Ebitda4 margin holding firm around 70% over the past few fiscals and expected to sustain at a similar level this fiscal.
Says Snehil Shukla, Associate Director, Crisil Ratings,
“Debt levels are expected to rise this and next fiscal, primarily to fund ongoing expansions, and planned asset and stake acquisition. Despite this, leverage will remain in check, supported by a healthy operating performance. The debt-to-Ebitda ratio is expected to remain stable around 3.0 times for the current and next fiscal, compared with 2.9 times last fiscal.”
