by Anushree Ghosh,
The Indian real estate sector comprises of retail, hospitality, commercial and housing. Housing contributes up to 5-6 % to the total GDP growth rate of the country. Foreign direct investment in opening multiple outlets in various brands has resulted in the expansion of the retail real estate sector.
Retail stores flourished, after India’s economic liberalization began in 1991, continuing with a striking 43% post the year 2000.India’s Retail industry is scattered and unorganized but it accounts for 22% of the total Gross Domestic Product of India. Urbanizing India with its rising population contributed further to the growth. The aspirational middle class has strengthened itself with more purchasing power; they are no more hesitant to spend. Retail is also booming because of the high availability of credit cards and loans. 2017 witnessed a prosperous retail real estate market, especially in Hyderabad and Bangaluru. The L&T Seawoods Mall at Navi Mumbai, as Pioneer Park Phase II at Gurgaon and The Palladium at Chennai are some other examples of the ever-expanding market. Apparels, F & B, and entertainment are the primary necessity drivers for retail spaces.
However, the decelerated sales of retail properties and accelerated vacating of spaces are connected to the impressive growth of e-commerce. Talking about the supermarkets, department stores and shopping centres – they all are affected by the increasing rentals too. So, it has become a vicious circle where people are opting out of the physical space to reduce costs and on the other hand, ecommerce is giving a tough competition to the actual stores. Yet, it would take another period to completely take over the physical retail market.
As the online industry continues to grow, it is adversely affecting the retail section of real estate, but contributing to the growth of housing and industrial sectors. Mobile phones have supplemented to the smoothness of the process, consumers are researching and making purchases even when they are stuck in traffic. Peer pressure, myriad mobile applications, and growing desires to be trendy are the key factors in driving the online sales. The cumbersome process of physically visiting a store has been simplified, and people also want to avoid the unnecessary conveyance charges, with the added advantage of same day delivery available for a few items.
Millenials are enough technologically advanced to opt for online services, while the older generation might be reluctant, depending on their technological dependence and knowledge. Businesses are splitting their services so that minimalist space is used, for instance – many banks are diversifying as micro- branches where customers are taught about online banking. Some retailers have adapted the online advertising schemes to augment their sales, playing at both the level; using social media marketing, search engine optimization and other online strategies. The turbulence in the system caused by the introduction of e-commerce has created many opportunities for the retailers and if used judicially, the existing evolution can be disrupted further to capitalize on it.