Mall rentals prove too expensive for entrants

The lack of dialogue between real estate companies, retailers and policy makers is a major hurdle to the development of the luxury market in India, reports Varun Soni.

The lack of dialogue between real estate companies, retailers and policy makers is a major hurdle to the development of the luxury market in India. Add to this surging mall rentals and it is enough to scare away any new entrant, experts said.

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“The Indian market is not fully liberalised as yet and is definitely not a bed of roses,” said N. V. Sivakumar, who heads the retail practice at PricewaterhouseCoopers. “We hope the situation changes for the better and a conducive environment is created for luxury retailers to operate in India.” Currently, the Indian luxury market is pegged at $450 million and is growing at 20 per cent a year.

“The global market is expected to touch $450 billion by 2012. The primary markets of growth for the sector are US and Asia,” he said. “India is a huge market considering its huge young population, growing disposable incomes and a steady growing economy.”

His comments came at the session where delegates debated if the Indian pie was large enough for global brands.

If you break up the luxury market in the country, then assets like jets, yachts etc. are worth $3 billion, luxury services add up to $1 billion, and luxury goods account for another $0.5 billion, he explained. “In fact, there are, 5-7 million new rich, 9-10 million of those who are getting there, and 11-12 million in the mid-affluent category,” he said.

As far as the future is concerned, the demographics of the country and the size of the market will definitely propel the luxury market forward.

“So, those brands that come in ahead of time and invest in India today will only be able to reap the benefits in times to come,” said Sivakumar.