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18 March 2004

 
India’s retail market shows a steady growth

Studies from a report by Colliers International Asia Pacific this January have shown steady growth for India’s retail market, with overall retail spaces for Mumbai, Delhi, Bangalore and Chennai expected to reach more than 5 million sqf by 2005.

The largest growth space is likely to come from Mumbai, where a total of 11 new malls, the majority in the suburban areas, would be located on an anticipated growth space of 2.4 million sqf.

Development authorities in Delhi are also working to create large-format organised retailing areas, where new malls would be built in West and East Delhi on a 2 million sqf space in the next two years.

Although mall development has not caught up in Chennai unlike other metros, the trend is likely to change middle this year when food chains, apparel stores and jewelers gradually move from traditionally preferred established retail locations to exclusive shopping malls.

While yields on rental property in Delhi, Mumbai and Bangalore are doing well in the range of 10-12%. retail rentals and capital values in Delhi are likely to remain sustainable in the first half of 2004 until new supply penetrates the market.

However, the report pointed out that the current concentration of major metros in specific areas like MG Road in Gurgaon, the western suburbs in Mumbai, and the CBD in Bangalore, as well as the provision of similar concepts, amenities and type of retailers by many malls could make it difficult for India’s malls to attract potential customers.

This is a new generation of customers who are well acquainted with the product through the media and exposure to western trends, and would go for products that are innovative and give ‘value for money’.

Many of them are also opting for a wholesome mall experience encompassing the retail, recreation and entertainment facilities under one roof. A case in point is the growing trend for multiplexes to become drivers for brisk business in India’s retail market. In Gujarat for instance, approximately three million square feet of retail spaces are currently undergoing development in towns like Ahmedabad, Surat and Baruch, all three of which are either linked to or situated close to multiplexes.

The report noted that mall developers would have to differentiate themselves in terms of developing retail space with different concepts and target consumers, as well as branching into new locations to tap on a wider customer base.

 

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