Retail Real Estate Market in India
In retail market, foreign direct investment has put India on the global map. Investors started thinking about retail real estate market in India. Retail real estate is directly linked with the retail industry, which is a sector that has reached the peak in the past few decades. The investor’s sentiment towards retail real estate remains favorable in India as Indian economy has been less vulnerable to the slowdowns relative to other markets of its counterparts. Though the retail real estate investment sector is poised for growth, however its pace is likely to be slower than as it is expected.
If you see just Mumbai city and project like akshar developers green world then you will find that there is a huge potential of real estate market in India.
As compared with commercial or residential reality, retail realty is much complex. Unlike an organization or a home buyer looking for an office, the investors of retail sector need to evaluate many other important factors. The investors has to deal with factors like, assessing demand for retail space, calculating expected returns from investment, checking performance of present retailers in the market, commercial trends of the locality, governing laws for the retail, consumer spending over the sector and so on.
Here, the retailer is crucial to the realty investor as he determines an investor’s expected returns from an investment through rent or minimum guarantee or revenue shares. Again, the motivation to lease retail space is in turn determined by the amount of sales a retailer can expect from a particular area. It is again linked with factors like consumer spending and disposable income. Overall, so many factors makes retail realty very a complex investment decision for the investor.
The developer is another critical link to this long chain of factors of investment. As compared with strata sale malls where each unit is sold to an individual owner, it is better for investors to choose malls that are managed by a professional agency or by the developer. Investors can also consider mix-use projects, because it offsets risks by having captive demand for residential and retail and also offers long term stability. Though on the flip side, mix-use project shops have a limited scope for retail activities.
The returns from investment and the revenue models are also important for retail real estate investment. The revenue model has evolved a lot in the past few years. A shift from rent to minimum guarantee or sharing revenue has occurred. Retailers are now paying a base rent along with a share of the revenue which allows retailers to bring down fixed costs and pass some business risks to the owner. This demands a higher risk for the investors.
The challenging economic conditions of falling rupee and political uncertainty have made India vulnerable. Among this the one trend that seems to hold is the demand for quality retail space which makes a sound investment and return long term. The retail FDI policy should also bring some demand from international retailers in the next couple of years. In India, investments in such developments are bound to be profitable in the long run and bring momentum to the retail real estate investment market.