Buoyed by the new policy to permit up to 51 per cent FDI in multi-brand retailing and 100 per cent in single brand, retail space take-up and rentals are expected to revive in the new year. This will be a huge relief for the sector, which witnessed rentals fall by up to 30 per cent in malls in key cities in 2012. According to international consultancy Jones Lang LaSalle (JLL), major cities such as Mumbai, Delhi (including NCR), Bangalore, Chennai, Pune, Hyderabad and Kolkata will see the addition of close to 9.5 million sq. ft of mall space in 2013.
Real estate players are already scratching their left palms in anticipation of deals with foreign retailers. Some of them have already held discussions with foreign brands to develop property on the outskirts of cities. The entry of foreign retailers could infuse fresh enthusiasm into the sector. Renewed demand for retail property could improve investors' confidence in the sector.
"Anticipated growth in demand is expected to bring some upward movement in retail rentals, particularly along established hubs," says Anshul Jain, CEO of DTZ India.
In 2012, the retail sector saw a drop of 65 per cent in the total supply in NCR, Mumbai and Bangalore, according to a report by the Royal Institute of Chartered Surveyors.
By the end of this financial year, vacancy levels in Mumbai and Delhi are expected to be about 20 per cent and 15 per cent across other cities, due to demand-supply gap, according to Balbirsingh Khalsa, national director, Office Industrial Agency, Knight Frank, another real estate consultant.
Among the major retail launches announced for 2013 are DLF's Mall of India and Unitech's Gardens Galleria, both slated for the second half of the year. However, analysts say the launches could slip into 2014.
In Mumbai, mall rentals are likely to see a nominal increase, says Ramesh Nair, managing director (west), JLL. With high-street rentals already very high, malls have become unaffordable and unviable for many retailers. Unless rentals become realistic, 2013 will see subdued demand, he adds.
CHD Developers is of the view that superior malls will have lower vacancy than the inferior ones, while rentals will get a push.