FDI in retail: Mall owners hopeful

Moumita Bakshi Chatterjee Updated - March 12, 2018 at 12:51 PM.

A green signal for FDI in retail would spur demand for retailspace. — S. Ramesh Kurup

The yawning spaces in empty malls may finally fill up if foreign investors are allowed to enter multi-brand retail. Mall developers are keenly following the policy signals that would have a trickle-down effect on the demand for shopping space. Also, allowing more foreign investment in the single-brand retail business will be an added sweetener for the commercial property market which has been facing oversupply issues.

Before the global downturn, the demand for new shopping centres fed the real estate boom, but the subsequent slowdown has left many neighbourhood shopping malls empty, concrete shells. Even today in many parts of the country, malls continue to see high vacancy.

Developers now say that opening of the sector will spur demand for sprawling, large-format spaces. “It will definitely be good for developers,” says Mr Sunil Bedi, Managing Director of JMD Group.

Of course, much would depend on the strings that come attached with the policy, including the geographical limits for foreign players to operate. Nevertheless, builders are excited. Once the big boys of the retail business come in as anchor clients in the malls, smaller tenants will follow. “Globally, transnational retail chains look at large formats of over 50,000-60,000 square feet of space on the outskirts of the city. So clearly, that will push mall construction into a higher orbit,” Mr Bedi adds.

His views resonate with Mr Rohtas Goel, promoter of Omaxe Group. “If the sector opens up, we will accelerate our plans for construction of retail space,” said Mr Goel whose company has malls in Gurgaon, Agra and Patiala.

JMD is in discussion to develop a plot on the Manesar Highway in the NCR, a move, it says, has been prompted by recent speculation over multi-brand FDI. Omaxe says it plans to develop malls in Indore and Chandigarh but much would depend on whether or not the Government gives a green signal to FDI in multi-brand retail.

Mr Rajeev Bairathi, director-investment advisory at DTZ India, says that developers should not expect rentals to spike up. “Rentals cannot exceed a certain proportion of the revenue that the store generates… Depending on the location, for a low-margin value retailer, that figure could be 4-8 per cent of store revenue. For private labels, it could be 10-15 per cent,” Mr Bairathi points out.

An official of Unitech, that builds retail projects, concedes that mall rentals will have to be linked to the viability of retail business.

>moumita@thehindu.co.in

Published on November 21, 2011 15:53