A new government is unlikely to bring any cheer to the domestic retail industry unless it spells out its foreign direct investment policy for the sector in which investors are holding back investments due to lack of clarity, industry experts have said.
“Everyone is talking about a stable government and growth prospects of the country. But I do not feel there is any good news for the retail sector, especially when there is no clarity on foreign direct investment in the sector,” DTZ India Chief Executive Anshul Jain said.
He said due to lack of clarity on the policy front, especially on allowing FDI in the retail sector, international investors are not ready to invest.
“The manifesto of the BJP has clearly said it will not allow FDI in multi-brand sector. Unless the government takes certain favourable decisions on this, the growth of the sector is unlikely,” he added.
Investors, both domestic as well as international, are also not keen on investing in developing retail real estate, Jones Lang LaSalle Country Head Anuj Puri said.
“Since 100 per cent FDI is allowed in development of commercial properties according to norms, the investor has to do all the ground work, including getting all the approvals for building layouts and infrastructure, among others. Investors fear the challenges that come along with this.
“Besides, there is no guarantee about getting the right retailers and are sceptical about returns. Therefore, they are unwilling to take the risk,” he said.
PE firmsSimilar is the case with domestic private equity investors, who are forced to look at other options in the real estate sector.
“There was a time when we witnessed huge investments in mall development from domestic players. But due to the risks, like delay in approvals, rising cost and low returns, even they are cautious,” Puri said.
“We do not see any relief to the sector at least in the near future. It is only if the existing norms are tweaked that the industry will move on the growth path,” he added.