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FDI in Multi-brand Retail to Bring Back Mall Mania

Ratna Bhushan & Ravi Teja Sharma, New Delhi, The Economic Times

July 28, 2011

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The move forward on the issue of allowing foreign direct investment (FDI) in multi-brand retail is a piece of good news for the real estate sector amid all the gloom. Most real estate players have either shelved or slowed down their plans to build malls and shopping complexes over the past few years as growth in the sector has stagnated.
Now with the Committee of Secretaries giving an in-principle nod to the proposal of allowing 51% FDI in multibrand retail, those plans are
expected to be revived.
“There will certainly be more demand for quality real estate once the FDI limit is increased for multi-brand retail,” says Pinakiranjan Mishra, leader, retail, and consumer products at Ernst & Young. With the likes of Carrefour, Wal-Mart, Tesco, etc, likely to enter the retail business in India once they are finally allowed, the . 22,000-crore retail real estate market is expected to grow at a CAGR of 25% a year for the next five years, growing at 50-100% after the second year, according to Jones Lang LaSalle India. “Today, there are only a handful of Indian corporates who have gone into retail and only with a few formats. We need a more competitive environment. With this, the muchneeded capital too will come into the country for retail which will mean job creation, investments by organised players, and very importantly training,” says Sanjay Dutt,
CEO, business at Jones Lang LaSalle India.
This will be a big opportunity for developers such as Unitech and DLF to re-evaluate their retail plans. Future group chairman and managing director Kishore Biyani says: “With new categories coming in and demand for real estate improving, developers will be able to fill up spaces and the pricing dynamics should get better for them.” Dutt points out that after 2008, most new developers who entered retail lost their confidence as they did not get good returns. “This happened because they thought it was just real estate. Now developers have realised that retail is a separate business altogether,” he adds.
Unitech announced its revamped retail plan recently. It is spending around . 2,000 crore to develop eight malls which are under construction at the moment and another four are being planned. Unitech’s head of retail, Munish Baldev says the
move to open up FDI in multibrand retailing will give developers more options to choose from, especially when looking for large anchor tenants.
The other large realty player with interests in retail real estate is DLF, which is moving ahead with its retail plans in
strategic locations. Its new mall in Noida is under construction and group executive director Rajeev Talwar says other malls in Chennai, Kolkata, Delhi and Gurgaon will be able to capitalise on the opportunity. “This will be the next game changer in real estate,” he says.
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