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    ‘We Should Have a Separate Earmarked Zone for Shopping Centres’

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    , Managing Director and  CEO, , shares the biggest challenges and bottlenecks in the development of the Indian real estate sector. He, however, opines that the real estate sector in the country has emerged as one of the most appealing investment destinations for both domestic and foreign investors.

    What is your assessment on the progress of the Indian retail real-estate industry over the past decade?

    Yes, with Indian government liberalizing FDI, the property market has emerged as one of the most appealing investment destinations for both domestic and foreign investors. The industry’s high growth and boom is primarily due to the mall culture, multiplexes and hypermarkets. Organized retail is on an upswing and retail brands from all over the world are showing keen interest to set up base in India especially MNCs. Rising demand for commercial and residential spaces is boosting growth. The retail real estate is expanding to remote towns and attracting big construction companies for development of malls, skyscrapers and infrastructure in these cities.

    In your opinion, how is the industry likely to evolve over the next decade?

    The Indian retail sector is in a dynamic state of re-invention, we can see a lot of growth initially by the thrust of private equity fund in this sector. India is a key destination for international retailers and although the retail market is yet to open fully open to direct investment from overseas, when it does, major international retail groups will expand rapidly across India; well-located, well-managed, prime shopping centres will be major beneficiaries of such expansion. But eventually this growth will be limited due to the over expansion and re-leasing.

    What do you think are some of the biggest challenges and bottlenecks?

    The retail real estate sector in India has been plagued with problems at all stages – back end, technology, supply chain, human resources, and lack of investment in all these areas,  leading to an inefficient market mechanism. Lack of storage has been one of the most alarming of these infrastructure gaps. If we overcome the paucity of good quality space developments and high land construction costs then the retail real estate will grow to its maximum potential. Plus there is no real demarcation/zoning of lands, like in the West. Once real estate developers know exactly how much space is available to create structures, I feel the real estate scenario will see an upsurge.

    Why do you think the Indian retail real-estate industry is lagging behind the West and China?

    As per recent GRDI report, China ranks fourth globally for retail development. Meanwhile, India’s retail development ranking fell nine spots from the 2012 GRDI to fourteenth overall. A growing trend in China is the addition of malls in 2nd and 3rd tier cities where massive retail opportunities still exist to target millions of consumers. In India, 2 and 3 tier cities are yet to witness this phenomenon. The reason behind that is that the expansion plans of the Indian retail outlet is affected by high operation costs, slow same store sales growth and space availability. Also, antiquated laws, unstable political environment, poor infrastructure has never allowed the industry to grow strong.

    Any suggestions for the government to consolidate the growth of retail real-estate in India?

    The industry and government of India should first give recognition to retail real estate as a separate industry. The government should provide better interest rates to run the business in this sector and reframe the development regulations. We should have a separate earmarked zone for shopping centres in master development plans of each and every city in India.