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Over 90% of the current and planned malls in India fall
way short of international standards, especially in
terms of specification and design.
This, coupled with factors like faulty
planning, bad location and the eagerness to pre-lease
on the part of the developer, are likely to lead to
a shakeout in the organised retail market in the country
in the next 2-3 years, says the report released by the
Indian arm of the Chicago based real estate consultancy
firm Jones Lang LaSalle Meghraj.
"A shakeout is imminent. There will
be some losers in the current mall boom that has gripped
the country and only those which are well-planned with
good infrastructure will remain in the race in times
to come," says Abhishek Kiran Gupta, Senior Manager
Research, Jones Lang LaSalle Meghraj.
The report also identifies 50 cities across
India that are ideally positioned to benefit from the
booming retail sector. It has divided these 50 cities
into five categories: maturing, transitional, high-growth,
emerging and nascent.
"With a population of over one million
, these cities will form the core of India's emerging
retail market," said Vincent Lottefier, CEO of
LaSalle. "The top 15 cities in the list will contribute
more than 80 per cent of the total national retail business
by 2008."
Delhi-NCR and Mumbai belong to the "maturing"
category. Together, they account for about half of India's
organised retailing today. In future as supply increases,
the report says, competition will intensify in these
markets. By 2008, some segments could even see saturation.
But these maturing markets still offer
opportunities. For instance, very large one-stop malls
that integrate retail, entertainment, food and hospitality
(hotels and service apartments) would find takers, as
would malls hosting high-end, luxury brands, or those
hosting hypermarkets.
"Transitional cities" include
Bangalore , Kolkata, Hyderabad, Pune, Chennai and Ahmedabad.
Said Vivek Kaul, associate director, retail and leisure
advisory at the firm: "By 2008, transitional cities
will account for one-third of organised retail space.
Their large corporate sectors, high level of economic
activity, above-average income, and large middle-class
makes them attractive to all the leading retailers."
Chandigarh , Jaipur, Ludhiana, Lucknow,
Kochi, Surat and Vadodara belong to the "high-growth"
category. These are the next retail destinations from
retailers' view point. Ludhiana, with its high per capita
income and a large NRI population, is the most favoured.
Kochi, a fast-emerging IT city is another.
"Emerging cities"- Nagpur, Indore
, Nashik, Bhubaneshwar, Vizag, Coimbatore, Mangalore,
Mysore and Thiruvananthapuram, will become important
over the next three years. The category also includes
tourist destinations like Amritsar, Agra and Goa.
Nascent cities include Patna, Bhopal, Meerut, Asansol,
Varanasi, Kolhapur and Sonepat will offer the first-mover
advantage.
The report cites that major retailers
were fuelling asset price growth in a rush to acquire
space and beat competition. "With retailers demand
out-stripping supply, double digit rental growth has
been a feature of most metros since 2004, and growth
is continuing into 2008," it said.
Leading business houses like Reliance
Industries and the Aditya Birla and Bharti groups are
investing heavily to cash in on a $300 billion retail
industry forecast to more than double in size by 2015.
Jones Lang said retail mall stock in India,
which was only 1 million sq ft in 2002, had expanded
to 19 million sq ft by 2006. "Based on the developers'
claims, the stock could more than double to over 40
million sq ft by end of 2007 and to 60 million sq ft
by 2008. However, there is a widening gap between developers'
claims and what is actually happening on the ground."
says the report
The rental of prime retail space in Delhi
is expected to rise by about 25 percent annually to
nearly 350 rupees ($8.5) per sq ft by the end of 2007,
the survey showed. Rentals in Mumbai are estimated to
rise by close to 10 percent this year.
Delhi NCR and Mumbai together will contribute
40 percent of retail business by 2008. Retailers will
need 22 and 15 million sq ft of space respectively in
the two cities, the survey said.
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