Rental income of mall developers to sharply surge in 2022-23: ICRA Ratings

09 July 2022, Mumbai:

Mall developers’ rental income is expected to grow by 30 per cent Y-o-Y in 2022-23 and surpass 2019-20 levels by 4-6 per cent in the current financial year, as per a report by ratings agency ICRA.

Growth in the income will be driven by pent-up demand, high vaccination coverage and resumption of multiplexes, retail malls since August 2021.

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Recovery in rental incomes at 74 per cent in Q2 FY2922 and reaching 102 per cent of pre-COVID levels in H2FY2922. New vacant space totaled around 11 million sqft in FY2021 and FY2011 across six cities, says Anupama Reddy, Vice President & Sector Head, Corporate Ratings, ICRA.

However, the incremental space absorption was only around 4 million sqft during this period resulting in a significant increase in the vacancy levels to 23 per cent in 2021-22 from 18 per cent in 2019-20. With the normalcy in the trading values, the occupancy is expected to improve in FY2023, adds Reddy.

The debt-to-OPBDITA ratio is expected to ease to 6x-8x in 2022-23 from 8x-10x in 2021-22, with a significant rise in operating profit before depreciation, interest, tax and amortization supported by improved trading density and footfalls.

Debt service coverage ratio, which was less than 1x for two consecutive years is expected to improve to 1.10-1.15x in FY2023 with the improved rental recoveries.

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