As both Houses of Parliament cleared the way foreign direct investment (FDI) in multi-brand retail, the mood of commercial real estate developers, who were facing a tough time building and renting out malls, is expected to look up. A revival of investment plans is on the cards.
The supply of rental spaces across India recorded a drop of 65% in 2012 from the previous year, according to a report by real estate consultancy Jones Lang LaSalle.
Industry trackers say real estate developers, who were postponing or cancelling plans to construct malls and other retail spaces in the current fiscal year are now expected to launch projects in 2013-14 to capitalise on the FDI approval that is expected to bring in international retail chains such as Wal-Mart, Tesco and Carrefour.
"FDI in multi-brand retail will increase demand for space. In India, per capita mall space among top seven metro cities is estimated at less than one square foot, while the US and Europe average 20-40 times that of India," said Subhasis Roy, national director for retail at property consulting firm Knight Frank India.
In the past five years, commercial and retail real estate developments were put on hold as rents stayed stagnant, dampening chances of good returns on investment. This was especially true for retail, in which realtors had even converted some projects to residential schemes.
"In the next 12-24 months, international retailers will accelerate their entry strategy. So, developers involved in shopping centre development will also get a boost and we will witness serious players expanding in this space," said Sanjay Dutt, executive MD, South Asia at consulting firm Cushman & Wakefield.
"In the medium to long term, the retail sector, real estate industry and the end-consumers will benefit from the move and the economy will gain momentum, depth and size."