Will the Indian retail boom get derailed due to a space crunch?
Shukti Sarma 04 February 2011

The domestic retail sector has the potential to grow to a $260-billion market. But with haphazard planning and bad governance, availability of land has become a big issue

Lack of availability of space for retail locations has emerged as a big issue. According to a white paper published by The Boston Consulting Group, by 2020, the Indian organised retail sector will be worth a whopping $260 billion, and will be contributing $25-30 billion more to the exchequer than what it is doing today.

But if the real estate sector continues to be what it is today, one may happily forget the figures.

Speaking at the CII Retail Summit 2011 held in Mumbai on 2nd February, Kishore Biyani, Group CEO of Future Group said, "Yes, the retail sector will grow to a $260 billion mark, but that is if we get the requisite space. In order to achieve that mark, we need 200 to 300 million square feet (of) space." But how easy would it be to get this kind of space?  If we go by some experts, things are not going to look up.

A senior executive of a real estate service firm (preferring anonymity) told Moneylife, "With haphazard planning and bad governance, availability of land has emerged as a big issue. Especially, if one is seeking a large area, like that for a big retail outlet, it becomes more problematic", he said.

Anuj Puri, chairman & country head of Jones Lang LaSalle India, also agrees that for retailers, space will become a problem. "[The] government must be transparent about its policies. In the last five years, no real estate investor has made money. People say that foreign direct investment will solve the problem, but I don't see how. Even with extra investment, be it domestic or foreign, we don't see the consumers getting any profit. Prices have risen and risen."

Due to unplanned growth in many places, land distribution has been done is an arbitrary manner. Many retailers have complained that due to the scarcity of land, they have had to settle for weird designs and inconvenient structures.

Also, the government prescribes that all retail spaces should be over 50,000 sq ft, regardless of their location. As a result, in upcoming urban areas, a retailer is saddled with maintaining a large area which is not profitable at all.

"The only thing that can be done at this point is to talk to the builders and dealers about the structures", said Mr Puri. "If the retailers and the builders sit together and chalk out a good plan, they can make the most out of the space they have got. That itself will make a good start. As for the rest, you must wait and watch."

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