Retail Mall Developers' Rental Income To Grow By 8-9% In FY25: Icra

The retail mall developers are set to witness 8 to 9 per cent growth in rental income in the current financial year, backed by healthy occupancy levels, expected growth in trading volumes and rental escalations. According to a report by Icra, the credit profiles of mall operators are expected to remain stable due to the comfortable leverage and debt coverage metrics.

Driven by the healthy demand from domestic corporates and the global capability centres (GCCs), the leasing activity remained steady with net absorption of around 53 million square feet (msf) in FY24 for the office segment for the top six office markets in the country. These six markets include Bengaluru, Chennai, Delhi NCR, Mumbai Metropolitan Region (MMR), Hyderabad and Pune. The net absorption was around 13 msf in Q1FY25.

The net absorption for FY25 is expected to remain around 55 msf, registering 4 to 5 per cent year-on-year (YoY) growth. Due to resilient absorption trends, the vacancy levels are likely to remain around 15.5 to 16 per cent by the end of FY25, compared with 15.6 per cent in the previous fiscal.

On the back of the rise in occupancy and high rentals leading to healthy growth in net operating income (NOI), the credit profile of the office players is likely to remain stable. The leverage is expected to improve to 4.5 to 4.6 times by the end of FY25. The rating agency expects the debt coverage to remain steady at 1.35 to 1.4 times in FY25.

A new supply of 8.5 to 9 msf is expected in FY25 for the retail mall developers across the top six cities. The vacancy levels are projected to remain around 20 per cent by the end of FY25. However, the strong urban consumption trends would aid 9 to 10 per cent YoY growth in the trading volumes in the current financial year, as per Icra.