jll research india’s_retail_luxury_quotient_sep2013

India’s Retail Luxury Quotient-Exploring the Luxury Clusters of India

Retail Intelligence I September 2013www.joneslanglasalle.co.in

India’s Strong Consumption Story Looking through the changing consumption basket of Indian consumers

All figures in (%)Brazil China India Russia

Growth of Young PopulationHigher growth of young population to last longer in India

(Growth in working population aged 15-59 %)

-101950-55

1955-60

1960-65

1965-70

1970-75

1975-80

1980-85

1985-90

1990-95

1995-00

2000-05

2005-10

2010-15

2015-20

2020-25

2025-30

2030-35

2035-40

2040-45-5

0

5

10

15

20

India’s Spending on Essentials (Proportion of Private Consumption Spending)

Essential spending as a proportion of Private Consumption Spending

4

3

2

1

5

6

7

8

9

10

10

15

20

25

30

35

40

45

2000 2002 2004 2006 2008 2010 2012

Healthcare Education Clothes & footwear Food (rhs) All figures in(%)

Source: UN Population Statistics, India NSSO data, Jones Lang LaSalle Research

India’s Spending on Lifestyle (Proportion of Private Consumption Spending)

Lifestyle spending as a proportion of Private Consumption Spending

India’s strong consumption story relies on its demographic structure, which, at this point in time, is highly favourable compared to most other emerging nations. As per the UN population statistics, this favourable demographic dividend will last for another 25–30 years. Before that, most other emerging nations would have already begun to witness a slowdown in the growth of young (working-age) population.

The ensuing benefits with regard to the rising income and household spending would provide a significant boost to the consumption-driven growth story of India. A glimpse of the changing pattern of India’s consumption is already visible in the breakdown of private final consumption spending data provided by the government. There is a marked increase in spending on lifestyle products and services such as hotels, mobiles, transportation and other miscellaneous goods. As against that, spending on essentials has only remained stable.

International retailers are well aware of these benefits that the Indian economy offers. Barring few legislative challenges that could be tackled through the policy reforms and opening up of the retail sector, retailers have often expressed their intention to enter and invest in India’s attractive retail sector. This is very well reflected in AT Kearney’s Global Retail Development Index 2012, where India ranks as the fifth most attractive retail market for international retailers.

3 INDIA‘S RETAIL LUXURY QUOTIENT

Industry Estimates Overall Retail Sector to Touch INR 34 Trillion by 2016

Source: CSO, ASSOCHAM, AT Kearney, Jones Lang LaSalle Research

Estimated Growth of Organised Retail

India’s Services Sector Breakdown (% of GDP)

20

18

16

14

12

10

8

6

4

2

0

18

16

14

8.27.1

Trad

e, ho

tels

&re

stau

rant

Fina

nce,

Insu

ranc

e,Re

al Es

tate

&Bu

sines

s Ser

vices

Com

mun

ity, S

ocial

& Pe

rson

al Se

rvice

s

Cons

truct

ion

Tran

spor

t, St

orag

e&

Com

mun

icatio

n

% of India GDP

4

3

2

1

0

2011 2012F 2013F 2014F 2015F 2016F

1.2

3.5

INR

trillio

n

All fi

gure

s in (

%)

40

35

30

25

20

15

10

5

0

2011 2012F 2013 2014F 2015F 2016F

16.9

19.4 22.3

25.7 29.5

34.0

21

22

22

23

23

24

24

Reta

il / G

DP sh

are (

%)

Reta

il sec

tor (

in IN

R tri

llions

)

Retail Sector Share in GDP


The retail sector is a significant contributor to India’s economic activity. Though a direct measurement of the retail sector is difficult to derive through government statistics, the trade, hotels and restaurant sectors come close to giving us an estimate of its contribution. That component, in which retail (both organised and unorganised) is the dominant activity, accounts for around 18% of India’s GDP. Within the services sector of India, this component is the largest contributor to the economy. Many institutions, however, may not agree with this possibly understated measurement of the retail sector, as it may not accurately account for the unorganised sector. For instance, as per the estimates of the Associated Chamber of Commerce and Industry (ASSOCHAM) presented in one of its retail reports of 2012, the contribution of both organised and unorganised retail stood at 22% of GDP. This would mean that Indian retail sector size should measure closer to INR 19.2 trillion in 2012. Leading research institutions such as AT Kearney and ASSOCHAM estimate this sector to grow at around 15% y-o-y over the next three–five years as against a 12%–13% nominal growth of India’s GDP estimated by the International Monetary Fund (IMF). Going by that logic, the retail sector should reach a size of INR 34 trillion by 2016. This is a significant growth. The sector is also an important contributor towards the socioeconomic well-being of the economy as it employs close to 9.4% of India’s labour force, as per the association.

In its current form, the retail sector in India is mostly unorganised in its structure, with the organised retail contributing a small 7% to the total sector as of FY2012. However, this industry is witnessing a fast transition and it is estimated that the organised sector will record a growth rate of close to 24% CAGR to increase its share to 10.2% of the total sector by 2016–2017, as per ASSOCHAM. As of 2016, the organised retail sector would therefore touch the size of INR 3.5 trillion.

While both formats compete in almost all categories, the unorganised sector is largely concentrated around the food and grocery portion, while the organised sector has harped on apparels, accessories and lifestyle goods more than on groceries.

Introduction to India’s Retail Sector

Break-up of Organised and Unorganised Retail

Source: India NSSO data, Jones Lang LaSalle Research

Source: Jones Lang LaSalle Research


Value of Grade A Organised Retail Stock in India

The presence of unorganised retail is spread across all parts of the country, although organised retail has started to flourish since the early part of last decade. Within that, most of the investible grade stock of Grade A category of retail spaces revolves around the larger metros. Delhi NCR and Mumbai NCR, thus, have been leading in terms of the cities having the highest concentration of Grade A retail malls, followed by other top Tier I and Tier II cities.

7%

93%

24

3520

4

10

2

8

6 1

7012

6

4

51

4 3 1Food and Grocery

Apparel

Consumer Durables, Mobile & IT

Home Décor and Furnishing

Beauty, Personal and Healthcare

Pharmacy

Jewellery, Watches and Eye Care

Footwear

Books and Music

All figures in (%)Organised retail (2011-12) Unorganised retail (2011-12)


Indian Retail Sector – SWOT Analysis

• SignificantcontributortotheIndianeconomy and thus important for policymakers

• Critical sector in terms of its socioeconomicbenefits• Creates livelihoodforalargesegmentofpopulation, both

officially and unofficially• India’s rising urbanisation—urbaninhabitantsvalueconvenienceshopping

• DisposableincomeinIndiaisontherise; helps enhance consumerism (spend now, save later)

• Witnessedhighgrowthratesinthepast, while growth outlook is also bright

• Agriculturesector in India is huge, offeringabundance of raw materials

• Information technology, which enables cost reduction for retail, is strong in India

Strengths

• Increasingawarenessofconsumers about quality products and services

• Indian retail sector is huge and is therefore seen as an attractivemarketbymultinationalretailers

• High level of consumerism encouragesproductinnovationand improved services

• While leading urban centres in India is rightly served, smaller townsandruralareasarealmostuntapped

• With a medianageofaround26years, India’s demographic dividend story will remain intact for many more years

• Government’sefforttowards increasing banking penetration and financial inclusion will further encourage spending

Opportunities

• Highlyunorganisedsectorand thus inefficient; causes drain on national resources (pilferage of food grains, etc)

• Poorinfrastructure limits growth and profitability• Regulatoryhurdles are high, especially in obtaining mandatory

multiple retail licenses• Managementofsupplychainisskewed in favour of few large

wholesalers/retailers• Within the organised sector, talentedprofessionalsaredifficulttofind

• Real estate cost, particularly in larger cities, acts as a deterrent• As yet, the retail sector doesnothaveanindustrystatus,

which limits its ability to raise financing• Multiplicity of taxes & taxing bodies coupled with a MRP

(Maximum Retail Price) regime reducesmargins

Weaknesses

• Vastunorganisedmarketputs severe downward pressure on industry margins

• Ongoingeconomicslowdownhas affected the spending power of consumers to a great extent

• Any move towards modernising the industry is met with oppositionfromwholesale-retailassociations

• Political deadlock between the proreformist parties and the left-wing conservative parties could delay necessary reforms in this sector

• Reversal of announced policy measures and retrospective clauses in litigation and taxation disputes affect investor sentiments

Threats

The Indian retail sector has witnessed unprecedented growth over the last decade, driven by robust economic growth, rapid urbanisation and changing lifestyles and aspirations of the Indian consumer. From less than 1 million sq ft of mall space in 2001, the Indian organised retail sector has increased manifold. However, the ups and downs of the Indian economy had always taken its toll with changes in absorption and vacancy over the years.

After displaying stellar growth, the retail scenario in India took a beating during the years after the global financial crisis (GFC). It bounced back in 2011 with

the completion of malls that were in the pipeline and dropped again with a decrease in supply and net absorption in 2012. In the coming years, we expect to

see a moderate inflow of fresh supply of mall space and a lukewarm demand for malls at poor locations and of inferior quality. This is expected to marginally increase

the vacancy in India’s organised retail stock.

All the seven cities in India, except Mumbai, are likely to experience increase in the vacancy levels in the midterm

of the coming three years. As demand is likely to be concentrated in malls in appropriate locations, based on sound research on cluster and consumer pattern.

We can see the higher change in Hyderabad with more than 15% increase because of poor performance in the absorption front. However, Chennai and Delhi—with a marginal increase—and Mumbai—with a decline in vacancy rate—could remain the better performers. We

also expect a significant increase in the Delhi NCR stock in the coming three years and Hyderabad stock getting

nearly doubled in the said time frame.

Source: Jones Lang LaSalle Research, 2Q13

The forecast value are taken of end-2015 and the present value is of 2Q13Source: Jones Lang LaSalle Research, 2Q13

1500('000 sq

m)

1250

1000

750

500

250

0

2009 2010 2011 2012 2013 2014 20150

5

10

15

20

25

30(Vacancy Rate)

Net Absorption

Forecast

Completions Vacancy Rate

India Retail: Demand Supply Dynamics


The organised retail stock of India stands at

67.1 million sq ft, in the major seven cities

Net absorption was down by 0.3 million

sq ft in 1H13 as compared to 1H12

Present vacancy in Pan-India Grade A

stock stood at 18.6% at end-2Q13

1H13 witnessed new supply, amounting to 90% of the total supply of the entire

2012


KeytoSuccess• Understanding the locational background and its suitability and

potential for upcoming retail brands• Understanding the consumer needs and wants• Venturing into locations that are having favourable residential

catchments or are likely to have better retail potential in the long run• Selecting the correct strategy for operations and growth• Churning in newer and innovative ideas for potential retail

development• Brand awareness campaigns that could help build performance

guideline for the retailers

The organised retail stock of India is

expected to be 87.4 million sq ft as at

end-2015

Vacancy is likely to remain unaltered with marginal ups and downs around

its present level

Future of Indian Retail

Retail Attractiveness Index

The existing high vacancy in malls in Mumbai and in Delhi NCR could also be attributed to the polarisation in the demand for malls in these cities. The malls that are in good locations and are backed up by the sustainable consumer community suitable for them are

helping them perform well with large footfalls and good conversion. Meanwhile, overambitious projects launched in with poor designs

at times coupled with poor locations contribute to higher vacancies within the vicinity and the rest of the city. Even with the expected

correction in supply in the long run, the vacancy is expected not to change much as some of these projects are under construction and would be operational in the midterm. Another important point to consider is the lesser availability of lands in the prime city areas for

the development of organised retail

Present Polarisation in Demand

Jones Lang LaSalle Research and Real Estate Intelligence Service (REIS), 2Q13 (for detailed parameters, refer to Annexure 1)

Cities Retai

l Attr

activ

enes

s Ind

ex

Marke

t Pote

ntial

Index

Real

Estat

e Driv

ers

Prim

e Reta

il Ren

ts

Grad

e A qu

ality

stock

s

Grad

e A qu

ality

stock

s com

ing up

in ne

xt 3 y

ears

Grad

e A H

igh S

treet

stock

s in p

romi

nent

locati

ons

Uppe

r-mid

and h

igh re

siden

tial u

nits l

aunc

hed i

n las

t 3 ye

ars

Demo

grap

hics

Migr

ation

in th

e las

t 4 ye

ars

% of

popu

lation

in S

ec-A

& S

ec-B

Prop

ensit

y to C

onsu

me

Hous

ehold

Inco

me

Hous

ehold

Exp

endit

ure P

atter

n

Hous

ehold

with

2 or

mor

e emp

loyed

Retai

l Con

sciou

snes

s Ind

ex

Popu

lation

in th

e age

grou

p 18-

45 ye

ars

Expe

rimen

ttaion

Inde

x

Cosm

opoli

tan In

dex

Bran

d Con

sciou

snes

s

Attra

ctive

ness

of H

igh S

treets

NCR Delhi

Mumbai

Bangalore

Chennai

Kolkata

Hyderabad

Pune

Source: Jones Lang LaSalle Research, 2Q13


Delhi NCR Delhi NCR tops most of the parameters on which we base our retail attractiveness quotient. The city tops all real estate drivers and also the sociopsychological parameters. As a result, Delhi NCR stood first in rank and we can deduce that it has the most enriching retail legacy among the Indian cities.

Mumbai With the highest in-migration and a large number of SEC A and SEC B population, Mumbai has the highest retail demand potential. However, a lack of availability of land parcels leading to high rents in prime areas act as a dampener that causes Mumbai to lag behind Delhi in terms of existing retail stock, and also against other cities when compared to the upcoming supply. The high propensity to consume creates an inherent shopping culture, which helps sustain the rise in demand for retailers.

Bangalore Bangalore ranks high on the chart with its good retail consciousness and the existing and upcoming supply. In addition, affordable rents in the city—compared to other Tier I and some Tier II cities—have helped the retail to flourish here. However, the city has lesser household expenditure even when compared to Kolkata and Chennai.

Chennai Chennai, with its affordable rents and good high street stock in contrast to the organised retail stock, has received the fourth rank. In addition, the large number of

Factor Indicator Metric

Market Potential Index (MPI)

Real

Esta

te D

river

s

Prime retail rents – Penetration of all the brands depends on the precinct’s rental affordability along with its high-income availability to continue to the profitability equation. Mature markets may tend to fetch higher rents. However, with high supply, the retail rents does not affect much

Average rents of 50% of the malls in the prime areas of the city (excluding the top 25% and bottom 25%), including the weighted average of vanilla and anchor rents

Completedqualitystocks – Presence of high-quality completed stock shows the extent of maturity of the market Total existing organised retail space

Upcomingsupply is a leading indicator of the extent of maturity expected in the market in the coming years Total organised retail space that is expected to come up by end-2015

Highstreetstocks in prominent locations drive the cities’ market potential Total high street retail in prominent retail destinations of the city in terms of shopping clusters and shopping centres

Highandupper-midresidentialunits produce the base for retail catchments in the city as the dwellers are more likely to visit the malls and the costlier high street locations

The total number of residential units in the upper-mid and high categories launched within the last three years

Demog

raph

ics Migration – Migrant population not only adds to the consumer base but is also likely to have increased its acceptance to organised retail spaces such as malls versus conventional stores People1 who migrated to the city in the last four years

Consumerprofile is another deciding factor behind a city’s drive to act attractive towards the retailers as most of the SEC A and SEC B population are conscious towards the presence of brands

Number of SEC A and SEC B population of the city

Prop

ensitytoCo

nsum

e Households above a certain income threshold are more likely to shop with higher frequency and foot larger bills than households with lesser income

Total number of households with income of more than INR 300,000 for SEC A, income more than INR 500,000 for SEC B and income more than INR 1,000,000 for SEC C

Expenditure of TIG is the decisive factor for propensity to consume Expenditure of households with income more than INR 500,000 per annum

Families that have morethanoneemployedmember have higher earnings potential. Moreover, employed members of the household have greater economic freedom in making independent consumption choices

Number of households with more than two employed members

RetailConsciousnessIndex(RMI)

The youngpopulation is more brand conscious and focused towards choosing products based on newer trends Population in the age group of 18–45 years

Experimentation with practicing newer fashion trends and consciousness towards modern fashion phenomena creates the base for international brands with better potential for experimentation

Qualitative understanding of the fashion consciousness of the cities and how they are reacting to the newer trends

A cosmopolitan city is the breeding ground for fashion potential Qualitative and subjective understanding of cosmopolitan nature of the cities

Brandconsciousness of a city helps the retailers to enter the market and achieve profitability with potential sales

Qualitative understanding about the performance of the international luxury and premium brands and the cities’ consciousness about the these brands that are newer entrants in Indian markets

Attractiveness of high streets of the city helps in building the retail consciousness even if the city does not have potential Grade A quality organised retail stock

Subjective and qualitative understanding of the performance of the high streets in terms of visibility and footfalls

Limitations• Preference for shopping malls will be higher in cities where shopping centres have been historically prevalent (e.g., Delhi) versus cities where high street shopping has been

prevalent (Mumbai, Chennai and Hyderabad).• The consciousness data has been used by qualitative assumptions. However, individual feelings and preference could vary in specific cases.• The future data and their impact are predicted. However, any change in the market scenario and unforeseen circumstances could change the equation and the process then

calls for a reiteration.

1 Number of migrants is based on total population because of the unavailability of data of migrants in SEC A population. It is assumed that the SEC A migration rate should be same for these top cities. Source: 1. Analytics and real estate data are sourced from REIS (Jones Lang LaSalle) 2. Demographic, sociocultural and income data is sourced from Indicus Analytics 2011–2012.

Annexure 1 Indicator and Metrics Used in Creating the Indices

high and upper-mid residential units launched in the last three years would be able to create the retail demand. However, many from Chennai migrate to other IT destinations such as Bangalore, Hyderabad and Pune, as indicated by their low migration rates.

Kolkata The best that Kolkata can offer to retailers is the attractive household expenditure and an illustrious high-street variety retailing. It has a fairly high concentration of SEC A and SEC B households whose propensity to consume is usually higher than others. However, rents in prime areas are not affordable and the retail stock is also low, both of which make penetration of the retailers difficult.

Hyderabad Hyderabad offers attractiveness in terms of affordable rents, which is higher only to Pune among the Tier II cities. In addition, a huge amount of upcoming supply in the next three years would naturally keep the momentum in consumption alive in the future. However, lesser household income and household expenditure has ranked it low in our table.

Pune Pune provides the most affordable rents in prime areas among the Tier I and Tier II cities. The high migration rates will be well supported or even enhanced in the future, given that the city has a large office supply per capita in the pipeline. However, low household income and expenditure compared to most other cities has ranked it the lowest.


Luxury Retail in IndiaExploring New Destinations


Key Luxury Retail Clusters in IndiaAt present, India enjoys only 1%–2% of the global luxury market. Luxury retailers, both national and international, are in a spree to foray or expand their footprint in India. The increasing foreign travels of Indians have significantly increased the brand awareness of India. Along with this, the increasing upper-middle class in India are the country’s key drivers of luxury retail demand. Louis Vuitton, Prada, Gucci and Jimmy Choo are no more unknown brands to India. In the last decade, luxury retail has grown significantly and is growing at a rate of almost 20% 1. From luxury cars and apparels to furnishings, all are paving their way into the choices of Indian consumers. The definition of luxury is very relative and changes from country to country and among different income groups. However, most households earning more than INR 1 million or above annually opt for luxury goods in India. With the significant growth of this income group, luxury retail in India is expected to witness steady growth in the coming years.

In India, preference for luxury goods is growing across all the metro cities, although they are mostly concentrated in Mumbai and Delhi. Luxury malls such as DLF Emporio in Delhi, Palladium in Mumbai and UB City in Bangalore are already operational.

However, luxury retailers generally open their stores in luxury hotels with increased preference from consumers as they are expanding their brand presence by starting their stores in high-end malls and high streets and sometimes opening their flagship stores in high-end residential neighbourhoods. However, finding a space as per their standards and specifications is still a challenge in India.

In this paper, we attempted to map a few such clusters across the seven metro cities in India based on the various qualitative and quantitative factors catering to the preference for luxury retail. The factors adopted to select the clusters were penetration of luxury brands and preference for luxury. These factors were analysed on the basis of the parameters below:• Presence of noted luxury apparel and accessories brands • Presence of luxury automobile showrooms• Presence of fine dining restaurants• Presence of luxury/premium residential projects• Neighbourhoods and catchments

When mapped, these parameters reveal clusters of luxury retail that can be classified into three categories. Based on their stage of development, the clusters are classified as established, existing, growing and emerging.

The clusters and their characteristics will be discussed on the following pages.

Luxury brands focus on strong growing brand consciousness and the fast growth of India’s upper-middle class

DLF Emporio in Delhi, Palladium in Mumbai and UB City in Bangalore are luxury malls operational in India.

India’s retail real estate has to upgrade its specifications to meet the global standards to cater to the luxury retailers’ requirements.

1. The Indian Luxury Summit 2012 – Analysing the Indian Luxury Market

Luxury Retail in IndiaExploring New Destinations


Delhi NCRAccounts for highest SEC A population having income of more than INR 300,000 pa

Audi, BMW, Mercedes,

Jaguar, Land Rover, Rolls

Royce

Zara, LV, Hi-Design, TAG Heuer,

Jimmy Choo, Paul Smith,

Emporio Armani, Clarks

Cost for two is greater than

INR 2,500 (excluding beverages)

LOCATION LOCATION ADVANTAGE REAL ESTATE PARAMETERS FUTURE OUTLOOK

Central Delhi (Established)

Being the oldest and one of the largest commercial, financial and business centres in Delhi, the location enjoys heavy footfalls which spur the retail sector. The presence of foreign bank branches, clothes and accessories, F&B and luxury car outlets is evidence of the retail potential of this developed cluster.

No malls are present here, with high street shopping the dominant retail format. Despite absence of high-end residential, this area is preferred by shoppers spread across the breadth of Delhi. As a result, the demand from retailers has pushed the retail rents to INR 400-500 per sq ft per month.

The unavailability of retail space is a concern. However, the demand looks bright in the cluster with huge footfalls each day.

West Delhi (Established)

A well-established area characterised by upper-mid and high-segment business families and private builder floors which has added to the attractiveness of this location.

No luxury residential units have come up in the past three years, but demand for organized retail has been driven by the existing SEC A population. This is evidenced by the presence of more than ten operational malls and another five projects under development. The retail rents are in the range of INR 150-200 per sq ft per month.

The future outlook is impacted by the presence of a dominant high street shopping culture, though recent developments have shown that the correct mall design and management can reap the benefits of excellent tenant profile and healthy footfalls.

WEST DELhI Rajouri Garden, Shivaji Garden, Rohini, Pitampura, Kirti Nagar

CENTRAL DELhI

Connaught Place (Inner and Outer Circle)

PRIME SOUTh Vasant Kunj, Saket, Greater Kailash, Khan Market, South Extension, Lajpat nagar

NOIDA

NOIDA (Sectors 15-18), City Center

GURGAONMG Road, Golf Course Road, Mehearouli Road, Delhi Gurgaon Expressway

EXTENDED GURGAON

NH8, Dwarka Expressway

ESTABLIShED EMERGINGGROWING

1 14 98

1 1 8

2 6 32

3 5 12

2 3 27

5 6 36

The featured brands do not make a comprehensive list of all the brands present in the city.


Prime South (Established)

Being home to the urban elite , this location has seen demand for luxury retail with a push towards international brands and luxury cars.

More than 250 luxury residential units had been launched in the last three years, which reciprocated the growth in spite of land shortage. Large numbers of foreign bank branches are also present to cater for the high net worth individuals (HNWI) population. Five midsized to large-sized malls are present, including the luxury mall DLF Emporio. However, there is a shortage of supply in the pipeline. Retail rents are within the range of INR 250–INR 300 per sq ft per month.

The future of the cluster’s retail looks good with its positioning as the city’s luxury retail focal point.

NOIDA (Growing)

NOIDA city and its city centre are acting as the major hub of the new age industries, which includes IT/ITES sector and are also catering to the demand of modern urban elites.

At present, NOIDA has five mid to large size malls with two upcoming malls in pipeline. The demand is supported by more than 4,000 high-end residential units launched in the last three years. The rental range is between INR 150-175 per sq ft per month.

The cluster is growing fast and could observe retail sector development coming up of age as it is supported by the high-end population.

Gurgaon (Growing)

Gurgaon is developing rapidly. Commercial sector development, complemented by the residential sector’s growth and proximity to the airport, is helping the cluster grow.

More than 3,000 high-end residential units were launched in the last three years. The retail demand has been supported by six midsized to large-sized malls. The presence of foreign banks and luxury car showrooms are also being driven by the real estate growth. Consumer demand has pushed the cluster’s retail rent to INR 175–INR 200 per sq ft per month.

The cluster’s future is bright with the development of new age commercials. It is also supported by residential growth, which drives a sustained retail demand in the long run.

Extended Gurgaon (Emerging)

It is one of the upcoming locations that is connected very well with Dwarka Expressway and NH8

This cluster witnessed the launching of more than 5,000 high-end residential units in the last three years, which created a base for huge consumer demand.

The residential sector could boost the cluster’s retail demand that will likely open up new possibilities and opportunities.


Mumbai MMRAmidst many retail clusters, retailers can still find opportunities by location & densification



Royce

Zara, LV, Hi-Design, Tag

Heuer, Jimmy Choo, Paul Smith, Em-

porio Armani, Clarks




Churchgate-Colaba (Established)

This is the oldest and among the largest commercial, financial and business centres in Mumbai. The cluster has a high level of commercial activity and tourism because of its huge footfalls.

This cluster has only one accessible mall at Nariman Point, although it is known to house popular high-street markets such as Colaba Causeway and Fort.

Unavailability of retail space is one of its prime concerns. However, the cluster’s demand is high with huge footfalls every day.

Bandra West - Juhu (Established)

This cluster is illustrious in terms of consumption parameters—particularly fine-dining—and receives high footfalls from its neighbouring high-end residential households and avid shoppers.

There is no mall within this vicinity, although it houses popular high streets and small shopping arcades. Rentals in this cluster are very high and space availability for constructing large malls is scarce

Demand is very high, but space availability, high rentals and competition from high streets could be of concern for mall developers.

Worli-Lower Parel (Established)

This cluster is home to the elite residential households of Mumbai. It also houses large-scale commercial buildings that help to attract footfalls from the high-consuming class. It scores very high on all consumption parameters.

There are four good malls and a prominent high street in the vicinity. It houses Mumbai’s only luxury retail mall—Palladium. Rentals are high, owing to its strategic location.

There is scope for further retail development, although the availability of space and high rentals would remain a challenge.

ThANE

Ram Marooti Road, Ghodbunder Road

MALAD KANDIVALI & BORIVALI

ANDhERI WEST

Lokhandwala Complex, Link Road

ANDhERI KURLA ROAD- POWAI

Hiranandani Powai, International Airport Terminal & Vicinity

BANDRA WEST- JUhU

Linking Road, Juhu Tara Road

BKC- KURLA WEST

LBS Marg

VAShI-NERUL

Vashi Node, Seawoods Node

WORLI- LOWER PAREL

Annie Besant Road, High Street Phoenix

ChURChGATE-COLABA

Colaba Causeway, Fort


3 1 40

0 2 36

3 1 5

6 7 18

2 6 32

3 0 5

0 1 1

0 2 3



Andheri Kurla Road- Powai (Growing)

With the upcoming completion of Mumbai’s first metro, there is an ample commercial and residential activity happening around this cluster as it is easily one of Mumbai’s most important east–west traffic corridors.

This cluster has witnessed Mumbai’s highest completions of high-end residential units during 2010–2012. Also, in terms of upcoming completions (2013–2015), it ranks the third highest. The cluster has no mall and consumers rely on high streets. Consumers have access to R-city, Phoenix and few other malls, but with some difficulty.

Retail high streets in Powai have already picked up well and there is a scope for this cluster to accommodate a large-sized mall.

Andheri West (Growing)

This cluster, which has been part of the western suburbs, houses the largest number of Mumbai’s SEC A households. Additionally, it houses several commercial establishments, thereby creating ample footfalls.

It houses approximately four to five malls nearby and it also boasts of a prominent high street around Lokhandwala Complex. While a couple of malls receive very good footfalls, others are struggling to attract consumers because of poor mall management. Rentals are high..

The future of retail in the cluster looks good with its positioning as the city’s luxury retail focal point.

Vashi-Nerul (Emerging)

Having several large-format malls and other sources of entertainment, this cluster is a shoppers’ paradise in Navi Mumbai.

Among all the clusters in Mumbai, this has witnessed the second highest completions of high-end residences in the last three years. Mall culture among households is high as the cluster lacks high streets.

While it is a growing retail cluster, the presence of prominent malls nearby will have to be examined. Identifying the right location will be very important. Cheaper rentals would likely attract developers

BKC-Kurla West (Emerging)

BKC is already been viewed as the emerging CBD of Mumbai. Presence of several large financial institutions and pharma companies amongst others ensures high footfalls and is looking to be the most premium office destinations. The spillover effect of BKC has been felt on Kurla West as well, which is developing rapidly.

Commercial activity is strong in the vicinity. The cluster will witness large number of completions of high-end residential units while it already is emerging gradually on the consumption parameters. There is 1 mall in the vicinity and it enjoys reasonably good footfalls.

The cluster will witness ample demand going forward. However, developers will have to strike a balance with high rentals it commands. With successful operation of malls such as Phoenix Market City in Kurla W, we believe it has potential to grow. In addition, F&B and automobile sector are looking to be easy entrants among others.

Malad-Kandivli-Borivli (Emerging)

This cluster has come to prominence due to its good road & rail connectivity to major commercial destinations and to South Mumbai. In recent times, it has shed its image of a cluster inhabited by lower or middle-income population. Our consumption parameters suggests gradual pick-up in demand for retailers

Residential activity has picked-up steam over last few years. By 2015, this cluster would witness second highest completions of high-end residential units. We also foresee gradual emergence of commercial activity which would help enhance retail footfalls.

Despite 2-3 prominent malls in the neighborhood, we believe there is ample scope for further development of retail considering the population size and growth. An upcoming mall, should receive positive interest from retailers, also considering its relatively low rentals.

Thane (Emerging)

An erstwhile hub of lower and middle-income population, Thane has lately completely transformed into a self-sufficient city, barring major commercial activity. Many high-street and malls has kept the retail activity bustling.

This cluster has become the hotbed of residential construction activity due to its affordability and vast expanse of unutilized land towards the interior.

Affordable rentals and availability of space, coupled with rising population and incomes will be the key trigger to further development of retail activity in this cluster.

Vasai-Virar (Futuristic)

This cluster has seen a large influx of population from erstwhile affordable residential corridors of Mumbai as well as new migrant population who could not afford a house in Mumbai. Therefore, while the inherent population is largely middle-class or lower, the new influx of population is largely higher consuming class.

Although starting to pick-up, property prices are relatively reasonable. There is no prominent Grade-A malls in this cluster, and shoppers usually frequent to high-streets and stand-alone stores to cater to their consumption needs.

Due to large-scale residential development, there is scope for retailers to tap the potential consumption. Few branded outlets have already started to foray into some of the high-streets. However, organized retail in the form of malls could be some time away.


BangaloreLuxury retail driven by IT development in the city



Royce

Zara, LV, Hi-Design, Tag Heuer,

Jimmy Choo, Paul Smith,

Emporio Armani, Clarks




Central Bangalore (Established)

As Bangalore‘s CBD, the cluster houses the city’s major banks, hotels and offices. This location is also lined by many premium and luxury national and international retail brands and therefore experiences large volume of footfalls.

This location hosts Bangalore’s most prominent malls—UB City, Leela Galleria, Garuda Mall and Forum 2 to name a few. It also has a few prime high streets that house local as well as national and international brands. This location enjoys good demand from retailers, but the availability of quality retail space is a challenge. As a result, the retail rents to INR 90–INR 150 per sq ft per month on the high streets and INR 200–INR 250 per sq ft per month in the malls.

As there is less scope for new development, the supply of quality retail space is restricted. However, good footfalls in this location will be the key attraction to drive the retailer demand.

East Bangalore (Growing)

Most preferred IT and residential suburbs of Bangalore. Good connectivity and availability of social infrastructure attracted overall development and it has luxury residential projects, prime hotels and malls. It witnesses strong demand for retail due to the rising population of IT employees.

This location is saturated with good malls such as The Forum Value Mall, Inorbit Mall, The Park Square Mall and Phoenix Market City Mall. This location enjoys good demand from retailers due surrounding catchment of IT employees and retail rents to INR 40-60 per sq ft per month on the high streets INR 150-200 per sq ft per month in the malls.

Quality malls continue to be developed in the area. Development of office spaces and high end residential projects in this location will drive luxury retailer demand.

North Bangalore (Emerging)

It is fast emerging as the next business destination of the city with development of business parks. This is also surging the development of high end and premium housing in this location. Consequently retail developments are also coming up.

This location has Orion Mall, Market City West, Vaishnavi Mall, Golden Grand Mall and Esteem Mall. This location also has few prominent high streets with good brand presence. This location is fast growing and so it enjoys good demand. Retail rents to INR 50-70 per sq ft per month on the high streets and INR 150-200 per sq ft per month in the malls.

There is large scope for new development in this location. There are few good malls expected to be operational in this sub-market. Development of office spaces and residential projects in this cluster will be the key attraction to drive the retailer demand.

South and South West Bangalore (Emerging)

This is an emerging business destination that connects the central city to the Electronic City. Good connectivity spurred the development of office and residential developments in this location. These developments led to the construction of high streets and malls.

This location has one of the prominent malls of Bangalore—The Forum Mall—along with Garuda Swagath, BB Mall, Gopalan Signature, Unitech Mall, Total Mall, SJR Spectrum and Soul Space Spirit. This location is enjoying good demand and retail rents of INR 70–INR 90 per sq ft per month on the high streets and INR 80–INR 150 per sq ft per month in the malls. In addition, rapid population growth and ease in travel has increased the catchment reach.

It has a large scope for new development. It has a few malls under construction. The development of office and residential sites along Bannerghatta Road, Hosur Road and Sarjapur, together with Electronic City will be the key attraction to drive the cluster’s retailer demand.

NORTh BANGALOREMalleshwaram, Yeshvantpur, Bellary Road, Hebbal, Hennuru, HSBR Layout

EAST BANGALORE

Old Madras Road Whitefield Road, White field

CENTRAL BANGALOREMG Road, Commercial Street, Cunningham Road, Brigade Road, Vittal Mallya Road

SOUTh AND SOUTh WEST BANGALOREBannerghatta Road, Sarjapur Road, Hosur Road, Outer Ring Road, Electronic City


0 8 24

5 0 8

0 4 9

0 4 10



ChennaiWell-known as one of the cities with best in-class high street retail destinations

Audi, BMW, Mercedes, Porsche,

Jaguar, Land Rover

Zara, LV, Hi-Design, Tag Heuer, MontBlanc,

Bottega Veneta, Starmark, Paul Smith, Clarks




T Nagar (Established)

The cluster only comprises high street destinations that produce an optimum mix of all categories of retailers, including value, lifestyle and luxury. It could be identified as one of the highest grossing high streets in the country with very good connectivity through rail and road.

High street retail is the talk of the town for this cluster. The age-old presence of this cluster and its fame attract consumers well beyond Chennai; therefore, this cluster does not rely on the neighbourhood residential catchment. Its consumer demand and absence of space pushed the rent to the range of INR 120–250 per sq ft per month.

The absence of new supply is a concern. As a result, large footfalls could lead to higher rents in the existing areas.

Nungambakkam (Established)

This is another well-known location in the city that is surrounded with MNC and government offices and foreign consulates. It is also one of the oldest locations with good rail and road connectivity.

It is one of the prime residential locations in the city with an increasing retail demand and growing space crunch. Bergamo Mall, the hub of luxury retail destination, is present here amid a number of small and midsized shopping centres and high street retail destinations. The rents are within the range of INR 120–INR 250 per sq ft per month.

The potential for retail growth is high and the only concern is retail space shortage.

Adyar (Established)

A posh and upscale upper-mid and high segment SEC A residential destination and another prime location for high street retail, the location also boasts of good connectivity to the other parts of the city, which attract consumers from across the city.

The high street retail is primarily supported by the neighbourhood catchments who reside in the high-end properties developed few years ago. This location does not have a mall as high streets cater the retail demand. The retail rents are within the range of INR 90–INR 150 per sq ft per month.

We expect the area to attract more luxury and high value retailers amid the presence of both consumers and affordable quality space

Velachery (Growing)

Another residential area in Chennai, its growth could be attributed to the growth in the city’s IT/ITES industry with its strategic advantage in location and connectivity to OMR and the central city.

Velachery and its neighbourhoods witnessed the launch of more than 500 high-end residential units in the last three years. This location saw two malls opening up this year including Phoenix High Street, the largest mall in Chennai. It also possesses good high-street destinations. The rents are within the range of INR 75–INR 110 per sq ft per month.

The retail outlook of Velachery looks promising with the growth of commercial sectors in the vicinity of OMR.

GST Road (Emerging)

It is one of the upcoming locations very well connected with roads and a proposed metro. In addition, a number of star hotels have come up in the area and it is shifting toward organised retail.

The emergence of IT along with other industries and the established residential catchment both support the high street retail. While the presence of an airport has drawn luxury car showrooms, lower rents of INR 30–INR 60 per sq ft per month supports the retail activity in this emerging location.

With more upcoming organised and quality retail space, the demand is complemented by residential growth in the upper-mid segment.

T NAGAR

Usman Road, Ranganathan Road, Pondy Bazaar

NUNGAMBAKKAM

High Road, KNK Road

ADYAR

SP Road, LB Road, Gandhi Nagar

VELAChERY

Velachery Bypass, Velachery Main Road, Taramani Road

GST ROAD

Tambaram, Chrompet, Pallavaram


0 1 0

0 0 6

2 0 7

1 6 25

1 0 16



PuneAmidst demand-supply imbalances between various clusters in Pune, the city can offer good retailing opportunities


Jaguar, Land Rover, Renault

Zara, LV, Rolex, Tag

Heuer, Diesel, Boggi Milano, Timberland,

Clarks




Koregaon Park-Bund Garden Road (Established)

This cluster is located in the heart of the city and is an established residential corridor, mostly of high-end households. Commercial activity co-exist thereby ensuring high footfall. The cluster scores high on consumption parameters making it preferable for retailers.

There is limited presence of organized retail apart from high-streets where footfalls are high. Availability of land is scarce for further retail development. Rentals in high street are high.

High rentals and unavailability of land acts as a deterrent for retailers, who have to focus on existing high-street locations for making an entry. However, demand continues to remain high in this cluster from boutiques and F&B.

FC Road-JM Road-SB Road (Established)

This cluster houses a large number of SEC A households and also has large student population that creates demand for a variety of retail outlets. It has a concentration of commercial space too.

This cluster has supply constraints. However it has prominent high-streets for retail. Rentals are high considering limited scope for new retail space to arrive.

Demand will continue to remain high and so will the rentals

MG Road-Camp-Dhole Patil Road (Established)

This is an old residential and commercial establishment near the Pune railway station. The footfalls in the cluster are high. It scores high on consumption parameters as well.

The cluster has two malls. One of them enjoys good footfall, low vacancy levels and high rentals. It has high streets, although the demand for organised retail could be higher.

Demand is very high. Availability of space, high rentals and competition from high streets could be a concern for mall retailers

Kharadi-Hadapsar (Growing)

This cluster boasts of upper-mid and high-end residential households and continues to pick-up as a residential destination. Commercial activity too is high.

The cluster has two existing malls which mostly receive good footfalls. Amid the scope for future development of retail, preference for location and quality of retail space remains the key parameters to be carefully considered. The cluster scores high on consumption parameters which indicates rising demand and growing affluence.

This cluster is promising looking at the gradual rise in consumption parameters. It is likely to witness to large supply of high-end residences in next 2-3 years.

Nagar Road- Kalyani Nagar (Growing)

Residential growth picking up on the back of large number of upper-mid and high-end residential households high commercial activity acts advantageous for the location.

The cluster has three existing malls with good footfalls. Amid the scope for future development of retail, preference for location and quality of retail space remains the key parameters to be carefully considered. High consumption parameters indicating the rising demand and growing affluence talks about the cluster

Large supply of high-end residences in next 2-3 years is promising for this cluster with gradual rise in consumption parameters

Aundh-Baner (Emerging)

Until recently, the cluster was not ready for retailers or mall culture. However, with the recent increased penetration of commercial IT and high-end residential, the demand for retailers is growing.

There are supply constraint of malls as of now, but there is one mall under construction. Demand is gradually gaining strength and availability of space may not be much of an issue at this point.

The scope for retailers is high. As the demand is strong, availability of space is not an issue and rentals are comparatively reasonable.

AUNDh-BANER

DP Road, Baner Road

FC ROAD & JM ROAD

FC Road, JM Road, Deccan

KOREGAON PARK- BUND GARDEN

North Main Road, Bund Garden Road

MG ROAD & CAMP

MG Road, East Street

KhARADI- hADAPSAR

Magarpatta Road

NAGAR ROAD- KALYANI NAGAR

Nagar Road


3 1 6

0 1 21

0 1 22

3 0 10

0 2 5

3 1 33



HyderabadSouthern India’s hub for Luxury cars



Royce

Zara, LV, Hi-Design, Tag Heuer, Jimmy

Choo, Paul Smith, Emporio Armani, Clark,

Canali

Cost for 2 is greater than INR 1,500 (excluding beverages)


Central Hyderabad (Established)

The central business district of Hyderabad, it houses major banks, hotels and offices of the city. This location is also lined by many premium and luxury, national and international retail brands and therefore it experiences large volume of footfalls.

This location is mostly dominated by high street and has malls such as Hyderabad Central. Prime high streets which house local as well as national and international brands are Begumpet, Somajiguda and Himayat Nagar. This location enjoys good demand from retailers however as availability of quality retail space is a challenge. As a result, the retail rents to INR 100-150 per sq ft per month on the high streets.

As there is less scope for new development the supply of quality retail space is restricted. However good footfalls in this location will be the key attraction to drive the retailer demand

West Hyderabad (Growing)

It is fast emerging retail destination as it has an established IT business development in the cluster. Most preferred IT and residential suburbs of Hyderabad. Good connectivity and availability of social infrastructure attracted overall development and it has luxury residential projects, prime hotels and malls. It witnesses strong demand for retail due to the rising population of IT employees.

This location has Inorbit Mall. Many prominent malls such as Forum Crystal, Manjeera Trinity, City Capitol and SLN Terminus are under construction in this cluster. This location is also emerging as prominent high streets with good brand presence. This location is fast growing and so it enjoys good demand. Retail rents to INR 120-150 per sq ft per month in a mall while high street rent is about INR 110-130 per sq ft per month.

There is large scope for new development in this location. There are few good malls expected to be operational in this sub-market. Development of office spaces and residential projects in this cluster will be the key attraction to drive the retailer demand.

Off Central Hyderabad (Growing)

Premium residential location of Hyderabad. It houses luxury residential projects, prime hotels and malls. It connects the central part of Hyderabad with the IT hub of the city- Hitec city. Therefore it witnesses office and retail developments along its key high streets

This location has the GVK One Mall and it houses many premium and luxury national and international brands the high streets of this location houses designer boutiques and Premium lifestyle stores. This location enjoys good demand from retailers due surrounding catchment and retail rents to INR 110-150 per sq ft per month on the high streets and INR 150-175 per sq ft per month in malls for vanilla outlets.

There is scope of development as many residential streets are being redeveloped as commercial properties. These developments along with development of high end residential projects will drive luxury retailer demand in this cluster.

North Hyderabad (Emerging)

This cluster is experiencing more of high street retail activity. Mostly houses upper middle class population. This location has the cantonment area and also many residential colonies. Therefore it witnesses good demand for retail. Many brands have their factory outlets in this clusters.

Predominantly high street development. Mall supply is a concern in this cluster. Rents in this cluster range in between INR 80-100 per sq ft on the high streets for good quality properties.

There is large scope of development. Development of villas are expected to drive demand in this clusters

South Central Hyderabad (Emerging)

This cluster is experiencing more of high street retail activity. Mostly houses upper middle class and middle class population. This location has many old residential colonies. Therefore it witnesses good demand for retail.

Predominantly high street development. Prajay Princeton Mall is operational in this cluster. However, mall supply remains a concern in this cluster. Rents in this cluster range in between INR 80-100 per sq ft on the high streets for good quality properties

There is large scope of development in this cluster as there are many new residential projects coming up in this cluster.

WESTERN hYDERABAD

Hitec City, Kondapur, Kukatpally, Gachibowli

OFF CENTRAL hYDERABADBanjara Hills Road No 1, 2, 3, 10 and 12, Jubilee Hills Road No 36 and 45

CENTRAL hYDERABADSP Road, Begumpet, Punjagutta, Somajiguda, Nagarjuna Circle, Secunderabad, Himayat Nagar

NORTh hYDERABAD

Vikrampuri, Tirumulgiri, Kompally, Dr. A S Rao Nagar

SOUTh EAST CENTRAL hYDERABADDilshuk Nagar, LB Nagar


5 6 14

1 4 5

4 1 9



KolkataThe third most populous city in India with a very high disposable income


Jaguar, Land Rover, Porsche*

Burberry*, Hi-Design,

Omega, Rolex, Michael

Kors*, Gucci*, Emporio Armani*, Canali*




Prime Central (Established)

As one of the oldest part of Kolkata, it is well supported not only by the existing office sector—which accounts for corporate headquarters, BFSI industries and other regional offices—but also by residential units as it is the home of most of the corporate executives and HNWIs.

With the presence of Alipore (most premium residential location of Kolkata) in the vicinity, more than 200 high-end residential units were launched in the last three years. Aside from high street retail as its most prominent feature, Kolkata’s popularity is also boosted by the presence of the prime malls Forum and Forum Courtyard and is expected to house Quest, a large luxury mall that will be operational by end-2013. Meanwhile, foreign banks’ main offices and a number of luxury car showroom talks about the retail demand. The high street rents could be in the range of INR 275–INR 400 per sq ft per month.

The absence of quality future stock in the long run is the prime concern with the prediction of robust growth in luxury retailing.

North-East Kolkata (Growing)

The existing posh and upscale Salt Lake and Kankurgachi neighbourhood and the upper-mid residences in the nearby areas along the vicinity of the PBDs as well as good connectivity through road and suburban rail with the suburbs help sustain the location’s growth to a longer term.

: With more than 200 high-end residential sites, residential growth through the plotted developments is booming. The location is seen to grow with the presence of four malls alongside other high street destinations. The rents are within the range of INR120–INR 200 per sq ft per month

The long-term retail growth prospect seems good as more residential developments are catching up with the IT/ITES industry growth in the city’s PBDs.

Prime South (Growing)

The cluster is one of the city’s developed retail locations with the presence of Gariahat as one of the most prominent value high street designation alongside the high-end residential neighbourhoods of south Kolkata, which is connected well to other parts.

More than 200 high-end residential units had been launched in the last three years, which reciprocates the growth in the location with the presence of South City Mall, the largest and one of the best performing malls in the eastern India. It has the optimum mix of small to midsized malls and prominent high street districts. The rents are INR 175–INR 225 per sq ft per month.

The absence of new organised mall stock is the prime concern amid the huge potential of luxury and lifestyle retail growth.

EM Bypass & Connectors (Emerging)

The presence of EM Bypass and its proximity to the Prime Central and Prime South clusters at different point with easy connectivity to PBDs and CBD are the cluster’s attractive factors.

More than 550 high-end residential units were launched in the last three years, making it one of the most active residential destinations. With one upcoming mall and a few under proposal, it could be the next hotspot in the city, with the present rents ranging INR 150–INR 200 per sq ft per month.

With the provision of developable land, it could develop as it is backed up by the growing high-end residential catchment.

NORTh-EAST KOLKATA Salt Lake, Kankurgachi, VIP Road, New Town Action Area-II, Ultadanga, Jessore Road

PRIME CENTRAL

Esplanade, Chowringhee, Park Street, Park Circus, Camac Street, Shakespeare Sarani, Elgin Road, AJC Bose Road

EM BYPASS & CONNECTORS

Topsia, Kasba, EM Bypass Central stretch

PRIME SOUTh

Ballygunge, Gariahat, Dhakuria, Prince Anwar Shah Road


3 0 6

0 1 19

0 0 20

3 7 39

*expected to be operational by end-2013 The featured brands do not make a comprehensive list of all the brands present in the city.


FDI in India and Luxury Retailers

FDI IN CASh AND CARRY ALLOWED IN INDIA

1997–2005• International luxury retail in India is still new• Most of the retailers adopted either franchising or joint venture routes• Ermenegildo Zegna, Louis Vuitton, Hugo and Chanel entered India

2006 – FDI OF UP TO 51% WERE ALLOWED WITh PRIOR GOVERNMENT APPROVAL IN SINGLE BRAND RETAIL2008 – GOVERNMENT hAD DISCUSSION ON ALLOWING 100% FDI IN SINGLE BRAND RETAIL AND 51% FDI IN MULTIBRAND RETAIL

2006–2010

• More than 50 global brands set foot for India foray, which included prominent luxury brands such as Hermes, Gucci, Dior, Fendi, Canali, Burberry, Emporio Armani, Jimmy Choo

• Franchising, joint venture and distribution arrangements continued to remain the entry strategies for retailers

• DLF Emporio and UB City, the first luxury malls in India, started operations in 2008

• Retailers focused mostly on Delhi, Mumbai and Bangalore to open their stores

2012 – GOVERNMENT RAISED FDI CAP OVER SINGLE BRAND RETAIL AND ALLOWED 51% FDI IN MULTIBRAND RETAIL

2011–2012

• Tumi, Bally, Armani Junior, van Laack, Roberto Cavalli, etc opened stores in India

• Many luxury retailers continue in joint venture formats because of the expertise of their local partners

• Luxury retailers were optimising store sizes because of significant increase in rents

• Rents for luxury stores increased significantly because of the lack of available quality space

2013 – GOVERNMENT RELAXED ThE CLAUSE OF 30% OF PRODUCTS TO BE SOURCED LOCALLY AND ALLOWING RETAILERS TO SET UP STORES IN CITIES WITh LESS ThAN A MILLION OF POPULATION

2013...

• INR 8.5 billion proposals were cleared by the government in single branded retail until April 2013

• French fashion brand Promod, France-based crockery maker Le Creuset, US-based accessories firm Fossil, Inc and French sports giant Decathlon have sent proposals to the Foreign Investment Promotion Board (FIPB) for approvals to open single branded stores

• Japanese retailer Uniqlo and Sweden’s and France’s Richemont are planning to enter India

• Availability of quality real estate to accommodate the requirements of luxury retailers is still a challenge

The Road AheadDemand–supplyGaptobenarrowedWith rising incomes, better education and young-age by their side, Indian consumers have emerged as a force to reckon with in terms of their potential spending power. Mature domestic brands and many popular global brands have already made forays into the country, with many more waiting for their first tranche of investment. Although the future of luxury retail in India is promising because of these aspects, it has its own challenges. In addition to this, the availability of retail spaces that are on par with global standards is another challenge. This challenge can be addressed by developers who have to focus on building strategically in terms of location and design of the property. Retailers are aggressive in their expansion plans, albeit cautious about property selection. They are not only looking for properties that suit their operations and costs, but also their customers in terms of the location, facilities and overall shopping experience. They are focusing on the quality of the malls, along with the mall management, tenant profile, etc, all of which are acting as factors responsible for the success of the malls.

OpportunitiesintheEmergingCitiesandLocationsMost Tier I and Tier II cities are bursting at the seams, with more upper income and middle income consumers penetrating deeper into suburbs where organised retail opportunities are presently limited. The saturation of established retail markets closer to the prime city centres is a compelling factor for developers and retailers to focus on this emerging consumption

hotspot. Early movers will enjoy the advantage of leasing space at cheaper rentals, although not before a thorough profiling of the cluster demographics is done. Analysis of cluster-level data on population characteristics, future commercial developments, upcoming residential units, etc has become increasingly important for the retailer to decide on a location.

PolicySupportClarity on FDI policy remains as a key concern. However, in recent times, the erstwhile reluctance for government reforms is gradually transforming, considering the difficult investment scenario that the global retailers has been highlighting. The bigger challenge, however, remains in getting the Indian polity’s approval and achieving majority consensus. Until that time, such concessions are likely to remain on paper. Retailers are likely to seek more clarifications and concessions; therefore, real ground activity on FDI inflows in retail is likely to be slow for the meantime.

AsiaPacific www.joneslanglasalle.com/asiapacificAustralia www.joneslanglasalle.com.auChina www.joneslanglasalle.com.cnhong Kong www.joneslanglasalle.com.hkIndia www.joneslanglasalle.co.inIndonesia www.joneslanglasalle.co.idJapan www.joneslanglasalle.co.jpKorea www.joneslanglasallekorea.co.krMacau www.joneslanglasalle.com.moNewZealand www.joneslanglasalle.co.nzPhilippines www.joneslanglasalleleechiu.com.phSingapore www.joneslanglasalle.com.sgSri Lanka www.joneslanglasalle.com.lk/Taiwan www.joneslanglasalle.com.twThailand www.joneslanglasalle.co.thVietnam www.joneslanglasalle.com.vn

Jones Lang LaSalle Asia Pacific

COPYRIGHT @ JONES LANG LASALLE 2013. All rights reserved. The content of this publication has been compiled from the various sources acknowledged. The information is from sources we deem reliable; however, no representation or warranty is made to the accuracy thereof. This report has been produced solely as a general guide and does not constitute advice. We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties.

Real Estate Intelligence Service (REIS) is a subscription based research service designed to provide you with cutting edge insights into diverse and challenging real estate markets through collation, analysis and forecasts of property market indicators and trends across all major markets across various real estate asset classes - office, retail, residential. REIS empowers you with consistent and complete market data and analyses for all real estate indicators by specific micro markets. It is supplemented by value added services including client briefings, presentations and rapid market updates. For more details, contact, AshutoshLimaye - [email protected]

AshutoshLimaye Head, Research and REIS [email protected] +91 98211 07054

ShubhranshuPani [email protected] +91 98205 19899

PankajRenjhen [email protected] +91 98992 18885

SujashBera Assistant Manager, Research and REIS [email protected]

SuvisheshValsan Assistant Vice President, Research and REIS [email protected]

TrivitaRoy Assistant Vice President, Research and REIS [email protected]

Jones Lang LaSalle Retail contacts in India

For more information about Research contact

Authors

jll research india’s_retail_luxury_quotient_sep2013

Business