Year 2016 Indian economy has witnessed some landmark decisions with a vision to overhaul the retail segment of Indian real estate market. These decisions include easier Foreign Direct Investment (FDI) norms of associated sectors, allowing 100% FDI automatically in single brand retail, 100% FDI under the marketplace model, single window clearance mechanisms for investments entering the market etc.
This has led the retail (PE) firms entering the segment since such reforms in 2016. Furthermore, such private equity investments are expected to grow by 20% in the year 2017 when such decisions are better materialised. This showcases the promising future of Indian retail real estate market in the India for the coming decade herein.
Majority of this retail investment in dominated by major international fashion brands and domestic food and beverage segment. Company outlets like H&M, Taco Bell, Armani exchange, Kiko Milano, GAP, Burger King, Johnny Rockets, Zara, Vero Moda. These developments lead to the development of various shopping complexes that provide these international brands avenues to establish their outlets not only in Tier-I cities but now Tier-II cities such as Ahmedabad, Coimbatore, Jaipur etc. L&T is a major player in development in such malls and shopping centres such as Seawoods mall of Navi Mumbai, Madhapur in Hyderabad and Punjagutta. Even despite this rise in supply, analysing the market trends, one can be sure that demand would still surpass the supply. This objectively showcases the promising future of this sector and a large room for growth and development of Indian retail real estate segment.
Such developments have also led to the growth of rental retail units everywhere including Tier-II markets. Innovative modes like revenue sharing models are devised to procure ease of rental units for new domestic companies to reduce their operating costs. This has essentially led to resurgence and establishment of flagship stores all over India. Essentially this also led to the growth of sub-markets as primary markets have become overcrowded, and thus instil demand led growth of the sector.
Although major metropolitan cities already contain established malls such as DLF trinity in South Delhi, Pacific mall in East Delhi, DLF and GIP in Noida, but studies have clearly shown that these big boxes can only supply and sustain merely 31% of the demand that is desirable for wresting the segment in the coming decade. Hence, one thing what the market can benefit by such international players in the market is how to develop and run such retail property units in a country. For this part, players like Tesco and IKEA can be beneficial and thus can lead to domestic transformation through learning by global experiences. Such players have been already running very successful retail units in nearly every continent. Thus the only challenge left for future is the problem of plenty, and which has to be manifested into an organised retail real estate market which helps in growth and development of the country.