FROM

MALLSCAPE TO DREAMSCAPE

Presented by :
Chris LeTourneur
President & CEO
MXD Development Strategists

India Shopping Centre Forum Mumbai, India

March 18th, 2008.

The Eve of India’s Retail Revolution

Over past 5 years, India has moved from culture of Traditional Street Retail Markets to a Shopping Centre Culture.

Over next decade India’s Urban Markets could grow by over Ten Times.

One year ago less than 5% of Indian retail facilities were within Organized Shopping Centers.

Rate of Shopping Center development grew by 37%in 2007.

Expected to grow by a further 42%in 2008.

In urban markets such as Delhi’s Gurgaon, Retail Spending Power is growing at 24%per annum.

First Wave of Indian Shopping Center development have evolved as Enclosed Vertical Malls.

Anchored by local Indian Brand Fashion Department Stores or Hypermarkets.

Developing Retail in the Indian Market - ISSUES

However, as India's retail revolution unfolds, a number of defining issues are framing this evolution:

• Constraints on land availability and Suitable Plots.
• Complex Zoning and land use policies and tax structures.
• Aging Infrastructure and services, such as roads, water & electricity.
• Foreign Direct Investment (FDI) regulations.

The Indian Market - CONSUMER TRENDS

At the same time, the following trends are fueling the third wave of retail development in India:

• Increasingly Global, Aspirational and open-minded market seeking International Brands and Luxury.
• Reduced savings & shift towards Personal Needs & Indulgences.
• Respect for value while seeking "Affordable Luxuries".
• Market polarization between "Value" and "Luxury/Indulgence".

The Indian Market - CONSUMER TRENDS

• Increase in Retail Spending by Young College Graduates, particularly on leisure.
• Surge in 20 to 34 Year-Old age cohort (280 million) resulting in growth in "Long Term Consumerism".
• Acceleration of Suburbanization as affluent residents escape pollution & congestion of central cities.
• Increasing Car Ownership expanding travel patterns in search of shopping & leisure
• Decline in Household Size as families shift from traditional joint-family to nuclear families increasing number of households & Demand for Consumer Durables.
• Increased Participation ofWomen inWorkforce resulting in Higher Disposable Household Income and a rise in demand for Personal Care, Health/Beauty Products, Jewelry and Fashion.

The Retail Development Chain

Major Retail Chains Active in the Indian Market

What is Driving the Growth in Organized Retailing?

• New-Age Young Indians are main benefactors of India's growing economy.
• Joint Venture Activity among brands, retailers, franchisees, investors and malls.
• India on radar of International Retailers.
• Many are in planning stages for Roll-Out in India's primary markets.
• Many Indian Retailers are Developing Store Networks that could potentially be bought by Internationals for "Turn-Key Entry".
• Occupancy Costs (rents) are seen to be high by Local Indian Retailers.
• Generic Supply of New Malls in size, format, positioning, amenities and merchandise mix.
• Attempts to Create Specialty Malls.
• Shake-Out is Anticipated.

Brand Awareness & "Affordable Luxury" Trends

• Consumers are blending Indian Brands and Global Brands to create a distinctively unique, "Indian Lifestyle Experience".
Value-orientation remains strong, even with luxury consumers.
Wealth is enjoyed rather than displayed - holdover from traditional Indian values supporting the "simple life".
India's emerging "Shopping Class" are fickle - quick to change brands/shopping centres in their pursuit of the "latest and greatest".
11% of Indian consumers claim to buy Armani - 38% would if they could afford it.
Bang & Olufsen already active in Delhi, Mumbai & Chennai and opening more stores.
Porsche, BMW, Audi, Bentley, Rolls Royce, Ferrari, Lamborghini & Maserati are all now in India.