What resur­gence of shop­ping malls means for realty in In­dia?

Hindustan Times (Chandigarh) - Estates - - ESTATES - Anuj Puri ht­es­tates@hin­dus­tan­times.com n The author is Chair­man ­ ANAROCK Prop­erty Con­sul­tants

With the ad­vent of e-com­merce in In­dia, shop­ping con­verged into mo­bile de­vices in the form of web­sites and/or apps. For a while, it ap­peared that ‘couch potato shop­ping’ was a real threat to phys­i­cal re­tail, and that shop­ping malls will run out of busi­ness.

That has not hap­pened – in fact, shop­ping malls are wit­ness­ing a vis­i­ble resur­gence in In­dia. A clear mea­sure of in­creas­ing fo­cus on the re­tail sec­tor is that pri­vate eq­uity (PE) play­ers in­vested more than $700 mil­lion into In­dian re­tail in Q1-Q3 2017 it­self - around 90% of the in­vest­ments that came in dur­ing the past two years (2015 and 2016).

Shop­ping malls in In­dia have come a long way in­deed, from less than 5 malls in 2001-02 to more than 500 in 2017. Over the last few years as the over­all econ­omy strug­gled, there was a drift of neg­a­tiv­ity about In­dian shop­ping malls be­ing able to sus­tain and were ‘go­ing to be out of fash­ion’. As it was, quite a few badly-con­ceived and ex­e­cuted malls did fail. The over­all im­pres­sion was that this was a larger trend and a sign of the times in­di­cat­ing that bad days were ahead for the phys­i­cal re­tail sec­tor. That said, one les­son learned is that there is a dis­tinct need for de­vel­op­ing mul­ti­chan­nel re­tail­ing rather than just re­ly­ing on the tra­di­tional meth­ods. Con­sid­er­ing that the fun­da­men­tal growth driv­ers of the re­tail sec­tor re­main in­tact, global in­vestors and shop­ping mall de­vel­op­ers re­main bullish on the sec­tor. In ad­di­tion to ris­ing dis­pos­able in­come, rapid ur­ban­iza­tion, in­creas­ing pur­chas­ing power and other re­lated fac­tors, the no­table in­di­ca­tors of a fairly bright fu­ture for In­dian shop­ping malls in­clude:

Favourable poli­cies

Sev­eral poli­cies in­cen­tivize play­ers in the re­tail sec­tor in In­dia. 100% FDI in sin­gle-brand re­tail, re­lax­ation of sourc­ing norms for multi-brand re­tail­ers, 100% FDI in the mar­ket­ing of food prod­ucts, and the re­vised Model Shop and Es­tab­lish­ment Act (that al­lows shops to re­main open 24x7) are ma­jor growth driv­ers for the sec­tor.

Glo­be­trot­ting In­di­ans

A sig­nif­i­cant por­tion of In­dia’s pop­u­la­tion are now glo­be­trot­ters trav­el­ling for busi­ness or leisure. As a re­sult, In­di­ans now have an ex­po­sure to var­i­ous brands and have vis­ited the largest, fan­ci­est shop­ping malls across the globe. The de­mand for re­puted brands and good qual­ity shop­ping malls is on a rise and will con­tinue to drive the growth of the In­dian re­tail sec­tor.

Holis­tic shop­ping ex­pe­ri­ence

Shop­ping is no longer re­stricted to the mere process of buy­ing prod­ucts - In­di­ans are now look­ing at a holis­tic shop­ping ex­pe­ri­ence and a fun en­vi­ron­ment wherein they can spend qual­ity time with friends and fam­ily. For all its size and in­du­bi­ta­ble scope for the fu­ture, on­line shop­ping is an es­sen­tially iso­lated dy­namic that lacks a ‘so­cial’ con­nect - which is a key rea­son for the con­tin­ued growth of shop­ping malls.

Lim­ited or­ga­nized re­tail pres­ence

Or­ga­nized re­tail pres­ence is very low in In­dia com­pared to the de­vel­oped coun­tries, in­di­cat­ing that there is scope for large-scale growth of shop­ping malls in the fu­ture. The or­ga­nized trade’s pen­e­tra­tion still hov­ers in the sin­gle dig­its – there is mas­sive scope for growth and ex­pan­sion for phys­i­cal re­tail.

Pres­ence of for­eign brands: For­eign brands such as H&M, Burger King, Ap­ple, KFC, Dior, Michael Kors and now even IKEA have al­ready en­tered In­dia and also have fu­ture ex­pan­sion plans.

The chang­ing busi­ness en­vi­ron­ment, favourable pol­icy shifts and the en­try of nu­mer­ous global play­ers in­di­cates that a resur­gence of shop­ping malls in In­dia is def­i­nite. Also, with di­min­ish­ing open spa­ces in the city, shop­ping malls are in­creas­ingly treated as a place to meet, greet and have fun with friends and fam­ily. The need of the hour now is to de­velop good qual­ity malls that can at­tract oc­cu­piers for the long-term so that the en­tire value chain of the re­tail sec­tor ben­e­fits.

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