In the last 2 – 3 years, Indian Retail Real Estate Sector witnessed the foray of global brands, the opening of many world class retail developments and strong demand for space across key retail markets. Approx 20+ new brands entered the country during 2016- 17, mainly in the NCR market. Altogether 180+ globally reputed brands entered/ expanded their presence in India. Add to that, the sector received more than US $0.7 billion of investment by PE firms/wealth funds. As indicated by reports, private equity investments into retail sector are estimated to enhance by as much as 20 percent in current year, indicating that overall market dynamics for the section continue to be optimistic.
About 3.4 million sq.ft. of new retail supply penetrated the market in the last year, with a big part of the supply (approx 40 percent) concentrated in Delhi NCR market, next to the Bengaluru and Pune. During the year, international retailers stretched their foothold with numerous store-openings led by global apparel and domestic F&B players who sustained to lead demand for organized retail space. New competitors in the field included Kiko Milano, Justice, Armani Exchange, Cath Kidston, Massimo Dutti, Hunkemoller and Longchamp. Old retailers like GAP, H&M, Marks & Spencers, Decathlon, etc. sustained to increase their presence across the major part of the country.
Trends in retail rental field varied across key high streets and malls in the last year. Even as some micro-markets observed stable rentals, other saw varying levels of rental rises. The increasing movement of rentals in these select micro markets was because of constrained availability of retail space, amidst a situation of high demand.
In 2017 - 18, India Real Estate Forecasters expects extra positive movement for the segment. About 7 million sq. ft. of Grade A supply, is estimated to come into the market, led by the Southern cities of Hyderabad and Bangalore. Together with this, we are expected to witness international and national players execute their entrance and development strategy in these cities, heading for a more uniform development of retail space in India. In spite of this strong supply pipeline, the demand for prearranged retail space will continue to exceed the supply in the top markets.
In Indian Real Estate in 2017 demand of retail spaces is expected to be dominated by fashion and F&B. Even as global brand such as H&M, Zara, etc. are about to dominate the fashion segment, the F&B segment, is about to be a healthy mix of domestic and global operators across the QSR, café, brewery and casual dining formats. Besides these segments, Family Entertainment Centers (FECs) and multiplex operators are also going to be active in leasing space at existing and upcoming malls in 2017.
For controlled supply (malls), most well-known developments are expected to witness a stable rental growth in this year, on the other hand future of modern retail In India is not likely to be uniform; with some malls having a higher bargaining power than others because of their brand mix, footfalls and catchment areas. Also, certain developments are likely to witness a rental refuse due to factors such as age of development and a sub-optimum tenant mix.
The Real Estate Regulatory Act is a very positive step which brings Transparency & Accountability in the industry. Now India is welcoming to the foreign investments with tax and capital gain benefits. Permitting payment of the Capital Gains Tax in Joint Development Agreement (JDA) after the development is completed is a big advantage to the developers. To boost foreign investors, the government has pulled the concessional tax rate of 5 % on interest for meeting the criteria foreign debt from June 2017 to June 2020.
In another step, the government will grant Permanent Residency status to foreign investors who meet criteria related to minimum investment and employment generation. The economy of India is growing. With improved transparency and condensed obstructions for investors, the inflow of foreign funds is estimated to be on an uptrend. These all steps will attract investors to all segments of the industry.
With ever-increasing urbanization and policy initiatives we are experiencing a change in utilization patterns towards a more mature nature. With the introduction of REIT’s in the near future, the class of malls is expected to get better and the perception of strata sale of properties is estimated to decrease very much. With GST Will Impact Real Estate from July 1, 2017, we will also see a validation of tax at different level as well as perfection in ease of performing business and complete movement of retail products. We as well expect affordable luxury to gain more grip and in turn drive the luxury retail segment.
