Canada Pension Plan Investment Board became the latest international investor to commit to India’s retail sector when it formed a partnership with the Mumbai-based developer Phoenix Malls, last month. The pension will initially invest 7.24 billion rupees ($110 million; €103 million) for a 30 percent stake, and eventually 16 billion rupees in multiple tranches for up to a 49 percent stake, in a joint retail investment platform. Andrea Orlandi, CPPIB’s head of real estate investments in Europe and India, tells PERE why now is a good time to be launching a retail investment strategy in India:
Andrea Orlandi: This is an opportune time to invest in retail real estate. The property and capital markets are positively aligned for the long-term capital from CPPIB. For instance, the Modi government’s reforms to attract global capital to India, including recent changes to international retailer entry requirements, have had a significant and positive impact on demand. Further, the Indian consumer is now well-versed with international-style retail experience. Increasing wealth and positive demographics are leading to higher spending in high-quality shopping centers. Finally, there has been limited availability of the capital required for developing or operating shopping centers on a long-term basis.
PERE: CPPIB has joined a small but growing list of international investors seeking opportunities in Indian retail. What are the first-mover advantages?
AO: CPPIB has committed resources to India since 2012 and opened an office in Mumbai in 2015. India is a good fit with a long-term investor like us and we believe that the country will be a leading source of global growth in the coming decades. The low current stock partly reflects the purchasing power in the country but also implies that Class A assets should witness sustained rental growth. It was therefore critical to act decisively because there is a limited supply of high-quality retail properties in India. We are excited to partner with a high-quality company in Phoenix Malls, the leading retail mall developer and operator in India, in this venture.
PERE: How does a retail strategy compare with an office investment in India from a risk and return standpoint?
AO: Retail real estate is a direct play on the India’s domestic consumption story, while office real estate in India is largely a play on the global offshoring story. Despite these differences, both sectors allow us to increase our exposure to the Indian market and invest alongside best-in-class partners.