Indian Real Estate – Retail Sector Collapsing

Like many real estate sectors, the Indian retail property sector relies solely on continual growth to survive and that growth has come to  a standstill over the last few months as the credit crisis takes it’s toll.

This is by no means a local problem and India is not the only newly emerged market to feel the pinch. Dubai’s luxury property market has collapsed, seeing falls of 70% in value last year alone; the Moscow luxury retail market has also collapsed, leaving gaping holes in the high streets, British property continues it’s decline and with 50% of estate agents closed, the UK high streets are also devoid of tenants.

Retail real estate in India was one of the hottest property sectors until last year, but development has all but stopped. Falling demand for retail goods, coupled with growing unemployment and lack of credit means no more new malls for a while.“Owing to volatile market conditions, insecurity of jobs, there has been a decrease in the number of footfalls in the malls in Pune. The footfalls also vary from location to location and depend on the new schemes introduced from time to time to attract customers. Also, during the present uncertain times, even those who do visit the malls do not necessarily end up buying things.” said Kishen Milaney, property consultant, Kaypee Shelters.

There are around 60 business locations in the heart of the Pune, as well as in the newly developed residential zones and IT parks.

“About 20 to 30 malls of various sizes are in the making. It is not clear how many will be completed as some are looking for better brands. Some may even change hands,” Milaney said.

Shopping Mall development in India Stops

Big Bazaar, which has six stores of various sizes spread across Pune, says luxury items like furniture and electronic goods had taken a hit.

“Today, there are many malls being planned — however, due to the economic slowdown, we expect many of these to see only partial occupancy until things improve,” said Anand Dutta, head (retail) Pune, Jones Lang LaSalle Meghraj.
However, the real estate developers are pinning their hopes on the IT sector and believe that the fact that Pune, as a traditional automobile manufacturing hub, will continue to provide impetus to the city’s retail realty sector.

Over the past 3-4 years, Pune has seen considerable growth in the IT sector, placing it close behind Bangalore and on par with Hyderabad. In the same period, the retail sector has ramped up to introduce a number of malls in response to the increased spending power and demographic changes.

There are about six under-construction malls, each measuring over 500,000 sq ft. At present, Pune’s retail-scape accounts for approximately 5 million sq ft.

There are about four-five townships of over 100 acres each planned in the city, and retail would be an inherent component of each of these. The scheduled townships will open up new frontiers, as will the proposed international airport, but whether these developments will be able to find financing remains a big question mark.