It noted that the primary reason which put down the interest of foreign players to conditions on sourcing from small scale industry.
"Notwithstanding the increase of FDI limit in single brand retail from 51% to 100% in January 2012, investments failed to pick up in the subsequent six months (January 2012-June 2012)," Knight Frank said.
"This happened even as the country witnessed an overall FDI inflow of USD 16.74 billion during these six months. As a result, the share of FDI in single brand retail fell from 0.03% in December 2011 to 0.02% in June 2012," it added.
However, it said that there would be improvement in the FDI inflow in single-brand retail over the next 6-12 months as conditions on ownership and sourcing has been eased.
"Single brand retail was opened to foreign investment in 2006 with a cap of 51%. This cap constrained foreign retailers desirous of entering India albeit with a full control. The limit, subject to fulfillment of certain conditions, was hiked to 100% in January this year," Knight Frank said.
The report said that the recent reforms measures announced by the government would have a positive impact on the realty sector, particularly commercial segment.
"The entry of foreign retailers would not just address the high vacancy in retail real estate but also help in the growth of such developments in future," it added.