India Retail Market Dynamics Q2 2026

In the first half of 2026, India’s retail market has exhibited a resilient growth momentum amid multiple external factors that could have adversely impacted the demand trajectory. According to our latest statistics, the demand for retail spaces remained intact between January and June 2026 despite sequential rise in inflation, indicating the sector’s firm footing as it prepares for a new growth phase.

The gross leasing volume in India’s top 7 markets in H1 2026 (January-June 2026) posted a total of 6.27 million sq. ft., a 10.5% annual growth over the H1 2025 total of 5.68 million sq. ft. This marks a significant milestone for the retail sector as H1 2026’s gross leasing activity is the highest half-yearly leasing volume recorded in the past four years.

In line with the cyclical trends associated with the opening quarter for any calendar year, Q1 2026 (January-March) witnessed gross leasing of 3.09 million sq. ft. as retailer expansion continued amid tight supply conditions. Leasing momentum strengthened in Q2 2026 (April-June), with volume rising by 2.7% sequentially to 3.18 million sq. ft. This sustained demand performance was due to continued retailer expansion across retail formats, driven largely by domestic brands, which accounted for 79.1% of the total leasing.

While the new shopping mall supply remained limited in Q2 2026, availability of new retail spaces in peripheral precincts of Delhi NCR and Hyderabad provided expansion opportunities for retailers looking to expand physical store footprint. Overall, new shopping mall supply in H1 2026 totalled 0.82 million square feet, representing a 64% y-o-y decline from the robust supply recorded in H1 2025. With these latest additions, India's total shopping mall stock now stands at approximately 92.08 million square feet.

For the past six to nine months, top retail brands have been struggling to expand due to lack of quality spaces in shopping malls driving them to evaluate alternate formats for store expansion. Despite moderated supply additions, healthy demand led the vacancy levels in shopping malls across the top seven cities to decline by 45 basis points (bps), from 11.60% in H1 2025 to 11.15% at the end of H1 2026. At the pan-India level, demand for organized retail spaces has strengthened on the back of experience-driven retail preferences by the consumers, with malls increasing their share in overall gross leasing from 38.9% in H1 2025 to 43.1% in H1 2026. Leasing volume in shopping malls grew by 22.4% y-o-y, underscoring retailers' growing preference for premium and organised retail environments.

Across India’s top seven cities, Mumbai (29%) and Delhi NCR (24%) comprised more than half of the H1 2026 leasing volume. Coupled with Bengaluru (23%), these three markets anchored the total demand for retail spaces, collectively accounting for more than 75% share, underscoring retailers’ continued preference for established, high-consumption retail markets. Kolkata emerged as a key growth market, with leasing volumes surging 87.3% y-o-y following the completion of a new mall in Q1 2026. Delhi NCR and Mumbai also recorded strong leasing growth of 75.9% and 69.6%, respectively, driven by sustained occupier expansion, while Bengaluru, Hyderabad and Chennai witnessed a moderation in leasing activity.

Fashion & apparel (33%) and food & beverage (18%) remained the largest contributors to retail leasing activity in H1 2026 followed by the entertainment segment’s share in total leasing at 16%. Entertainment segment’s share in gross leasing increased from 12% in H1 2025 to 16% in H1 2026, supported by a 41.5% y-o-y rise in space take-up. This growth was largely driven by family entertainment centres (FECs), including bowling alleys, gaming zones, and children's play areas, highlighting the growing importance of this segment. In contrast, the daily needs and grocery segment witnessed a stark 39% decline in leasing volume, primarily due to the rapid expansion of quick commerce and dark store networks.