FDI in Retail: Its impact on the retail & realty sector

FDI in multi-brand retail will have two fold impact on the Indian real estate sector. Firstly it will increase demand for anchor space in one million plus cities where the state governments agree to permit foreign retailers & secondly there is a possibility that rental expectation would be raised, as not much of quality space would be available, suitable for big-box retail.

For multi-brand retail, anchor space in upcoming, under construction & project launch stage malls, Indian & existing foreign companies are either in negotiation stage or signed up space at these new  upcoming projects, which will put the new entrants in a tight spot, as they will have to look for only new upcoming projects going to be operational only after 3-4 years from now.

In India, per capita mall space among top 7 metro cities is presently estimated at less than a square feet, with US & Europe average being 20-40 times of India. Steady GDP growth & young population having more disposable income, can attract investment for mall development in India. As compared to developed market, the square footage in our country is very low & there is steady increase in rentals due to shortage of available quality retail space, this could trigger new projects.