The quarterly report titled Asia Pacific Property Digest, issued by JLL India, reveals that foreign retailers are potentially delaying their entry into the Indian market by another one to two years. Initially, the realty developers had anticipated that these international retailers would soon establish their outlets and stores across India, as the country's foreign direct investment policy created a favorable environment. Developers were hopeful that they could find adequate customers to fill the vacant retail spaces in their shopping mall projects.
However, JLL India's findings suggest developers may need to curb these expectations for the time being. This intellectual insight, emanating from the Asia Pacific Property Digest, indicates that the anticipated induction of foreign retailers is likely to be postponed for a duration of one to two additional years.
According to real estate consultants, this delay can largely be attributed to elevated realty costs, compounded by the upcoming union elections in India, which are also influencing market dynamics. In India, rental expenses, which account for approximately 9 to 15 percent of retailers’ total revenue, stand in stark contrast to the global averages of merely 4 to 10 percent—indicating that operational costs are significantly higher in this region.
Global retailers, who invariably remain sensitive to costs, have exhibited hesitance in making substantial investments within the Indian retail landscape.
The report asserts that the eventual presence of foreign retailers would effectively diminish the monopolistic control currently held by city centers over the retail domain, presenting a positive outlook, as articulated by Ashutosh Limaye, the head of JLL India's Research and Real Estate Intelligence Service. Expanding upon this sentiment, Limaye recommended that developers should extend retail spaces to domestic retailers at decreased rent, specifically in locations that are distanced from city centers. Nevertheless, accomplishing this would necessitate a reduction in land costs in these areas.
Moreover, foreign retailers face another significant challenge: the veto power held by state governments over FDI policy. While the central government has sanctioned a 51 percent foreign direct investment, the states retain full autonomy to sculpt their distinct FDI regulations, resulting in varied policies across regions.
In contrast to JLL’s report, CBRE has pointed out that foreign retail entities are still eyeing locations in New Delhi and Mumbai for potential setups, asserting that these retailers are poised to commence operations irrespective of the prevailing economic downturn.