Article from Indian Express
The government has been targeting reforms at right places, like in the retail sector. It has recently allowed Foreign Direct Investment (FDI) reforms and liberalisation for single brand retail trading and duty free shops. It has also been taking measures for easing FDI norms for the e-commerce segment. Although the government seems to be dedicated to sourcing FDI and improving ease of doing business in the country, the restrictive manifesto on multi-brand retail trading (which restricts a foreign investor’s stake in an Indian multi-brand retailing company to 51 per cent) continues to be a deterrent for foreign retailers and overall retail market development in India.
On the positive side, the growth in retail space demand during 2015 was driven primarily by the fashion and apparel, and F&B segments, with the Delhi National Capital Region (NCR), Bengaluru and Mumbai witnessing the most absorption of investment-grade shopping center space.
Leading global fashion brands, H&M and Gap, opened their first and second stores in India at Delhi’s Select Citywalk and Ambience Mall, respectively, to long queues and much fanfare. In fact, both the brands have already secured prime retail spaces in existing and upcoming malls in major cities—bearing testimony to the fact that India has emerged as an important destination for international retailers.
With an increased appetite for newer concepts and cuisines among Indian consumers, along with the arrival of F&B-centric developments such as DLF Cyber Hub at Gurgaon in the NCR and Epicuria at Nehru Place in Delhi, the F&B segment saw heightened activity in 2015. Established players such as Burger King, Dunkin Donuts, Starbucks, and Nando’s undertook significant expansion campaigns during the year; while Wendy’s, Jamie’s Italian, Pizza Express, Barcelos and Carl’s Jr were among the new ones to enter the Indian F&B landscape.
A significant gap, however, still exists in terms of quality retail real estate in key markets; and this continues to be a challenge for international retailers considering their India entry. 2015 saw the launch of DLF Mall of India at Noida in the NCR (at 2 million square feet, it’s touted to be the largest mall in the country) and Virtuous Retail’s VR Mall in Bengaluru. Major shopping center developments such as Garden’s Galleria and Logix City Centre at Noida, Bharti’s Worldmark at Aerocity, Delhi, and L&T Seawoods Mall at Navi Mumbai are scheduled to open in 2016; and a surge in shopping center supply is indicated across the metro cities.
Given the rising popularity of online shopping, more and more retailers are adopting an omni-channel strategy—by establishing online portals as well as strengthening their network of physical stores. The e-commerce boom has also led mall developers to re-imagine and enhance the ‘offline’ shopping and mall-going experience of customers. They are effectively bringing in a variety of international brands and offering a mix of vibrant entertainment and F&B options for shoppers. The brick-and-mortar format of retail real estate is all set to compete with today’s virtual shopping space as the former focuses on ‘experience’ and ‘entertainment’.
While challenges still exist, specifically for FDI in multi-brand retail, 2016 is expected to be a buoyant year for the retail real estate market in India. With international anchor tenants increasingly willing to explore big-box formats in shopping centers as well as customized, smaller store formats on high streets, demand from global brands is expected to drive organised retail space absorption in 2016. With premium developments focused on luxury retail planned in Delhi (Chanakyapuri) and Mumbai (Bandra–Kurla Complex), the luxury segment is also expected to bounce back stronger. In fact, the demand for retail space will most likely exceed supply, and further put an upward pressure on rentals for major high streets as well as investment-grade shopping centers.
As global brands pursue their India entry plans and domestic players continue to expand their footprints, the retail real estate market in India will be keenly dependent on a more open FDI policy regime and the timely delivery of quality space by developers to be able to reach its optimum potential of becoming a leading retail market in Asia.