India overtook China to top the global Retail Development Index in 2017 with a market attractiveness of 63.4% and retail sales of about $1 trillion, the CBRE report says
Bengaluru: Investments in India’s retail market by private equity firms and wealth funds touched $200 million, a report on the first half of 2017 by real estate consulting firm CBRE South Asia Pvt. Ltd showed.
There were 70 new entries or expansions by global and domestic brands across Mumbai, Delhi-NCR and Bengaluru during the first six months of the year, the firm said in its India retail market report published on Thursday. Seven new global brands entered India during the period, including apparel names like Kate Spade and Scotch & Soda.
India overtook China to top the global Retail Development Index in 2017 with a market attractiveness of 63.4% and retail sales of about $1 trillion, CBRE South Asia said in the report.
“With several legislations and policies in implementation mode, we are already seeing an increase in consumer and investor confidence. This will have a cascading effect on the retail segment. Overall, retail real estate will continue to grow and witness healthy demand across tier I and II cities," Anshuman Magazine, CBRE’s India and South East Asia chairman said in a statement.
Many retail developments were completed across select cities and resulted in about 1.5 million square feet of fresh supply entering the market. Demand for quality retail space was strong during the first six months of the year with a majority of the supply concentrated in Mumbai, Bengaluru and Delhi-NCR.
The supply pipeline for the rest of the year is also healthy and is led by Hyderabad and Bengaluru, the report said, adding that demand for quality space will remain strong in the fast fashion, department store, sport and leisure segments.
Completion of infrastructure initiatives will decide the rental trajectory for markets. But rental growth in most high streets across key cities will be limited since rents in these locations have already peaked, CBRE said.
“The fact that demand for quality space continues to outstrip the supply is indicative that the retail real estate segment across key cities in India is growing exponentially. While global brands continue to evaluate and consider quality retail developments in the top cities, with growing globalization, smaller cities are also gaining prominence and witnessing traction," Vivek Kaul, the firm’s India retail services head said in a statement.
The implementation of the goods and service tax (GST) has had some impact on the retail segment, CBRE said. While most essential items are exempt from tax, fast-moving consumer goods (FMCG) are in the 5% tax bracket, restaurants are in the 18% slab and some items–ranging from luxury cars to movie tickets priced over a certain amount–are in the higher 28% bracket.
Going forward, retailers will need to review their product pricing based on market expectations and accordingly align the rest of their business–from procurement to distribution–to ensure they remain cost-effective, CBRE’s report said.