Realty market will get a boost by 100% FDI in e-commerce

Centre’s announcement of 100 per cent foreign direct investment (FDI) in e-commerce was hailed by the real estate players in the city. They expect that this will have a significant impact on Indian real estate, especially in metros like Bengaluru.

“The newcomers in the e-commerce sectors – like their predecessors – will require larger office spaces to house their back-end teams,” Anuj Puri, Chairman and Country Head JLL India said. “They will naturally direct this requirement to the country’s top seven cities. The second impact will be on the demand for warehousing and logistics real estate.”

The real estate in the tier 2 and tier 3 cities will also see a boost because unlike the demand for office spaces, the additional requirement of foreign players will be spread fairly evenly across Indian cities.

E-commerce players need to be able to deliver quickly to their customers and clientele segments in the tier 2 and tier 3 cities. Therefore there will be a significant step-up in demand for warehousing spaces in and around these cities, the experts opined.

Satish BN, executive director of Knight and Frank South India said, “This is a positive step taken by the government. It will surely have a positive impact on the real estate companies. But currently it is hard to predict the exact percentage of occupancy that might increase as a result of this announcement.”

On the flip side, there has been a rider clause attached to the FDI liberalisation on the sector. E-commerce players now will be unable to sell below market prices and not more than 25% of sales will happen via one vendor. This announcement brings brick-and-mortar retailers on a more level playing field. This would help to curb the outcry over unfair trade practices to an extent.

“If we look at the West, e-commerce and brick-and-mortar players coexist happily, and this dynamic can definitely reflect on the Indian terrain as well,” added Anuj Puri. “With e-commerce in India still at the nascent stage, the base being low even now and the growth rate very high, there is enough scope for both e-commerce and brick-and-mortar retail to flourish which in turn will boost the real estate sector.

Credits Bangalore Mirror

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