The government’s decision to suspend FDI in multi-brand retail has disappointed the real estate sector that was banking upon a demand surge for retail space.
The only silver lining, for developers, is the likelihood of 100% foreign investment being permitted in single brand retail. But single brand retail has its own limitations in terms of space requirements.
“It appears that politics has superseded economics,” Rajeev Talwar, executive director, DLF told HT. Talwar said demand for quality retail space would continue to exist with the proliferation of domestic supermarket chains, but “things will move at a slower pace.”
Realtors feel that from their perspective, allowing FDI in multi-brand retail was not only about leasing space by corporate retailers, but about a simultaneous boost to economic activity and demand for residential space around these projects.
Anshuman Magazine, managing director (South Asia) of global real estate consultancy CBRE said it is a wrong presumption that multinational retailers are desperate to come to India. “India is a desirable market and everybody is interested to have a presence but nobody is desperate.”
Raj Jain, president Wal-Mart India had earlier told HT that the company would study the shopping trends in a city before scouting for space, which would have taken a year. That is likely to be on hold, at least for now. “Demand will continue to come but certainly at a slower pace,” said Rohtas Goel, chairman Omaxe.
And this slow demand, for instance, will come from single brand retailers such as Swedish furniture major IKEA and domestic retail giant like Reliance Retail. IKEA leases huge space of the tune of 30,000 to 50,000 sq ft. and Reliance wholesale cash-and-carry trade are housed in single mega stores averaging 1,50,000 sq ft each.
But, can these fit into the shoes of multi-brand retailers such as the WalMarts and the Carrefours? The question remains unanswered.