2007

World Winning Cities Series

Emerging City Winners Profiles

The Geography of Opportunity
The “India 50”
EXECUTIVE SUMMARY

India’s Retail Awakening

India’s retail sector is evolving at breakneck speed, fuelled by a strong economy, favourable demographics, rising wealth levels, and
the rapidly changing lifestyles and consumer aspirations of an ever growing middle class. Rarely a week goes by without major
announcements by retailers and property developers committing to aggressive programmes of retail expansion and shopping mall
development; or announcements about the arrival of new market entrants or the forging of new joint ventures with foreign retailers,
all eager to participate in an increasingly dynamic sector. India’s cities are witnessing a paradigm shift from traditional forms of
retailing into a modern organised sector; a transformation that will no doubt accelerate over the coming decade. The booming retail
sector is offering significant new property opportunities, but also many challenges for a new market that is going through structural
change at an unprecedented rate.

The demographic and economic statistics that underpin the growth of India’s retail sector are truly impressive, but in order to get
a realistic perspective on property opportunities, we need to comprehend how Indian consumer behaviour is changing; and to
understand how new retail geographies and retail formats are likely to evolve in a country characterised by enormous cultural and
regional diversity. So to help uncover the potential of the Indian retail property market, Jones Lang LaSalle Meghraj has embarked on
a programme of in-depth research to better understand the current and future landscape of retail property in India.

A New Geography of Opportunityt

This report is the first in a series on India Retail Futures. It reviews in brief the drivers of India’s booming retail market, and how
both retailers and the property sector are responding to the massive changes in the Indian retail environment. The report’s primary
focus, however, is to explain and predict the emerging geography of Indian retail activity and property opportunities. Most organised
retailing and retail property activity is still overwhelmingly concentrated in India’s two largest metros – Delhi/NCR (National
Capital Region) and Mumbai. Whilst the report concludes that there are considerable property opportunities in these two vast
cities, increasing competition combined with the growing opportunities in India’s regional markets is encouraging both retailers and
property developers to move into new and potentially more rewarding markets further a field. Organised retailing in India’s other
main cities, such as Bangalore, Kolkata, Hyderabad, Pune and Chennai is growing rapidly, but such is the pace of change, that many
smaller third tier cities are now firmly on the radar screen of the retail sector and mall developers.

With around 50 cities of over one million population, many of which are still largely untapped, there are clearly substantial
Winning Cities: INDIA RETAIL

opportunities for the retail property sector. Domestic retailers and shopping mall developers are moving aggressively into India’s
smaller cities in order to gain first mover advantage, to capture growing consumer markets and to respond to the strong demand for
branded goods. There is clearly a significant requirement from both the retail sector and the property industry to know where India’s
next growth opportunities are likely to be concentrated.


 JAMMU AND KASHMIR
Srinagar

HIMACHAL
Amritsar PRADESH
Ludhiana
Chandigarh
PUNJAB
UTTRAKHAND
Panipat
HARYANA
Delhi Meerut ARUNACHA PRADESH

RAJASTHAN UTTAR PRADESH

SIKKIM
Jaipur Agra
Jodhpur Lucknow ASSAM
Guwahati NAGALAND
Kanpur BIHAR
Varanasi Patna MEGHALAYA
Allahabad
MANIPUR

Ahmedabad Dhanbad Asansol

TRIPURA
MIZORAM
Bhopal JHARKHAND
GUJARAT Indore Jabalpur WEST BENGAL
Jamshedpur
MADHYA PRADESH Kolkata
Vadodara
Surat CHHATTISGARH
ORISSA
Nagpur Bay of Bengal
Arabian Sea Aurangabad Bhubaneshwar
Nashik
Mumbai MAHARASHTRA
Pune
Solapur
Hyderabad Vizag
Kolhapur
ANDHRA Vijayawada
Goa PRADESH
GOA

The India 50
KARNATAKA

Chennai
Mangalore Bengaluru
Mysore
India’s Emerging Retail Hierarchy
Coimbatore Maturing NCR/Delhi Mumbai
TAMIL NADU Transitional Bangalore Kolkata Hyderabad Chennai
Kochi
Madurai Pune Ahmedabad
KERALA
High Growth Chandigarh Ludhiana Jaipur Lucknow
Kochi Vadodara Surat
Emerging Indore Amritsar Jalandhar Mangalore
Nashik Bhubaneshwar Agra Vizag
INDIAN OCEAN Coimbatore Kanpur Nagpur Goa
Allahabad Mysore Jamshedpur Thiruvananthapuram
Nascent Jodhpur Patna Varanasi Meerut
Rajkot Aurangabad Bhopal Sonipat
Vijayawada Madurai Ranchi Guwahati
Jabalpur Asansol Dhanbad Panipat
Kolhapur Srinagar Solapur

The “India 50”
The Watch List for the Decade
Making sense of the numerous opportunities across India
represents a significant challenge for the property sector. Jones
Lang LaSalle Meghraj has undertaken detailed analyses of the
socio-economic profiles of 50 Indian cities . We have combined
this profiling, with primary and secondary research into the
existing and future plans of major retailers and retail developers
in order to identify the likely future retail hierarchy and the
nature of property opportunities.
To create a view of the where, how and when each of the “India
50” will emerge as interesting locations for property; we have
consolidated all the intelligence, information and views we have
on each market in order to create a new retail city classification.
Our analysis has identified five types of cities; each group is at a
different stage in its market evolution and offers a different set
of opportunities for retailers and the property sector. They are
summarised below:
Maturing Cities
Delhi/NCR and Mumbai are “head and shoulders” above the
other Indian cities in terms of number of shopping malls and
organised retailers. Since 2003 their shopping mall stocks have
increased markedly, and both cities have significant pipelines.
Competition within the NCR and Mumbai will intensify as
supply grows and there is risk of saturation in some market
segments by 2008. Nonetheless, there are notable market
gaps and both metros are sufficiently large and diverse to
accommodate a wide variety of new formats, including large
one-stop malls, speciality malls catering for luxury brands, city
hypermarkets, smaller neighbourhood malls and “big box”
retailing. The NCR and Mumbai will unquestionably continue to
dominate the Indian retail scene, and despite strong growth in
secondary and tertiary cities, we predict that these two metros
will still account for 40% of India’s organised retail sector by
2008.
Transitional Cities
Transitional Cities are now firmly making their mark on
the retail sector. Whilst organised retailing is a more recent
phenomenon than in the NCR and Mumbai, they are catching
up as both retailers and developers tap into their large
middle classes. Bangalore, Kolkata, Hyderabad, Pune and
Ahmedabad all have significant mall development in the
pipeline, while activity is also expected to accelerate in Chennai.
By 2008 these six transitional cities are likely to account for one-
third of India’s organised retail sector. Bangalore has the most
aggressive shopping mall development plans, with a wide variety
of retailers attracted to the city’s increasingly cosmopolitan
population, and the city is a favoured market to test new retail
concepts.
 Representing all metros over one million population, plus other major commercial hubs.
High Growth, Emerging and
Nascent Cities
New retailers (both national and international) are still
largely focused on India’s main cities, but expanding domestic
retailers and mall developers are now selectively focusing on
smaller cities, and by 2008 more than one quarter of India’s
organised retailing will be in tertiary cities. These cities offer
favourable opportunities for retailers due to growing consumer
markets, considerable latent demand for branded goods and
lower property costs. They are also less saturated than India’s
main cities, and are less likely to face future competition from
international players.
High Growth Cities. A small group of cities have over the
past year entered a high growth phase. They include cities with
substantial consumer spending power (such as Ludhiana),
India’s most important tourist city (Jaipur), rapidly growing IT
hubs (such as Chandigarh and Kochi), as well as several other
medium-sized cities (including Lucknow, Surat and Vadodara).
These high growth cities, mainly located in northern India,
are perceived by retailers as the “next retail destinations”.
Chandigarh, Ludhiana, Jaipur, Lucknow and Kochi lead the
pack, characterised by high levels of shopping mall development
and significant retailer interest.
Emerging Cities. On the basis of the future plans of major
hypermarkets and department store retailers, a group of 16
“emerging” cities are likely to be the next growth markets over
a three year horizon. Factors such as growing incomes, rising
aspirations, scarcity of branded stores and growing corporate
activity are increasing the demand for organised retailing. In
cities such as Nagpur, Indore, Nashik, Bhubaneshwar, Vizag,
Coimbatore, Mangalore, Mysore and Thiruvananthapuram, IT/
ITES companies are rapidly expanding their workforces, which
in turn is stimulating retailer activity. These cities currently
represent among the most interesting locations for property
developers, as retailers scour these cities for opportunities, and
demand far exceeds supply. This group also includes several
major tourist destinations such as Amritsar, Agra and Goa,
as well as a number of southern Indian cities which have so
far been less impacted by organised retail than their northern
Indian counterparts.
Nascent Cities – A further 19 smaller cities (most of which
have populations of between 1-1.5 million) are classified
as “nascent”, largely reflecting low per capita incomes and
limited corporate activity. Organised retailing is currently
very limited, but they are on the “watch list” of pioneering
retailers and mall developers that are seeking to benefit from
first mover advantage. Progress towards the development of an
Winning Cities: INDIA RETAIL
active organised retail sector in these cities is likely to be slow,
although market conditions can change rapidly should their
local economies be boosted by new corporate arrivals.

 India’s Retail Hierarchy-Characteristics
Shopping Mall % of National Typical no of Format Opportunities
No of Typical Metro
Development Organised shopping malls
Cities Pop’n (Mills)
Since: Retailing (by 2008) (by 2008)
† Large Mixed Use Malls
† Speciality & Luxury Brands
Maturing 2 20 1999 40% 50-150
† Big Box
† Neighbourhood Malls
† Large Mixed Use Malls
† Speciality & Luxury Brands
Transitional 6 5-16 2003 32% 20-30
† Big Box
† Neighbourhood Malls
† Mixed Use Malls
† Large Department Stores
High Growth 7 2.5 2006 11% 5-10
† Branded Stores
† Big Box
† Mixed Use Malls
Emerging 16 1.5 2007-09 13% 2-5 † Department Stores
† Branded Stores
† First Mover Advantage
19 < 1.5 2010 3% 1-2 † 100k + Shopping Malls
Nascent
† Supermarkets/Hypermarkets
Source: Jones Lang LaSalle Meghraj Research

The Future: Promises and Problems

This report shows that the Indian retail market offers significant opportunities for domestic and international retailers and property
developers/investors across a broad range of geographies and formats. Rapidly changing consumer behaviour, new market entrants
and changing government policy will further transform the sector, and open up yet more opportunities. The organised retail sector is
developing at breathtaking speed, and the insatiable demand for modern retail is far outpacing supply. The market has entered a very
exciting phase of evolution, but undoubtedly there will be losers as well as winners…
In the rush to expand retail formats and build new malls, many retailers and developers have lacked strategic vision, and in a
booming market they have often lost sight of the “end game”. There is also a huge amount of market hype, and a widening gap
between developers’ claims and what is actually happening on the ground. The reality will be that many planned retail schemes will
not get built, and most of those that do eventually become operational will fall well below international standards. As more choice
becomes available for the Indian consumer, many malls and retail concepts will fail the test of time.
Yet this “shake-out” will provide even greater opportunities for an elite group of visionary developers, owners and retailers who have
the scalability, the teams, the processes and the logistics required to flourish in this rapidly growing retail environment. They will
go on to set new benchmarks, not only for India, but for the world. Subsequent reports in the Jones Lang LaSalle Meghraj series on
India Retail Futures will assess the formulae for success in terms of retail formats and asset management. The Indian retail market is
full of promise, but it is not for the faint hearted and success requires a deep understanding and knowledge of the Indian consumers
and their likely retail requirements.
India Retail in
Brief
The 21st Century Landscape:
A Masterpiece of Modernisation
Retailing is emerging as one of India’s most dynamic and fast
paced sectors. The drivers of its upward growth trajectory hardly
need rehearsing, but they nonetheless help to explain why the
Indian retail market is seen by both domestic and international
retailers, as well as the property industry, as one of the globe’s
greatest untapped market:
Favourable Demographics – Two-thirds of India’s 1.1 billion
population is below 35. The country’s median age is 24 years,
comparing favourably with China where the median age is 33
years. India is home to 20% of the global population under
25 years. We are seeing a tidal wave of young adults entering
India’s consumer society with rising aspirations, new lifestyle
requirements and an insatiable demand for consumer brands.
Rapid Urbanisation – The country is urbanising at a rapid
rate, with almost 50 cities over one million population. India’s
“mega-cities” – Mumbai and Delhi – will be the world’s 2nd and
3rd largest cities by 2015, providing massive concentrations of
retailing potential.
India’s Economy is Booming - Economic growth, currently
at circa 9% is supported by a rapidly expanding IT/ITES
sector, a deepening corporate base, growing FDI, economic
diversification and policy liberalisation. Most forecasters expect
7-9% annual growth over the next five years, fuelling strong
growth in consumer demand.
Growing Middle Classes – Estimates of the size of India’s
emerging middle classes vary enormously, but there is little
doubt that the numbers are large. Currently 70 million + earn
over $18,000 a year, a number that is expected to double by
2011. We are also seeing the ascendancy of the “super rich”,
with 1.6 million households bringing home over $100,000. The
propensity of the middle classes to consume is rising, oiled
by easier availability of credit, income growth of around 15%
per annum, and a notable shift from a “saving” to “spending”
mindset.
The Emergence of Organised Retailing – A widely quoted
fact is that 97% of retailing is still concentrated in traditional
neighbourhood “mom and pop” stores. In few other countries
around the world is organised retailing so small. But India’s
cities are witnessing a paradigm shift from traditional forms of
retailing into a modern organised sector requiring international
standard retail formats, providing massive opportunities for the
property market. This pace of change will accelerate over the
coming decade.
India’s Vanguard Consumers
The demographic and economic facts widely quoted are
undoubtedly impressive, but in order to assess the true nature
of property opportunities, we need to better understand the
deep and widespread transformation that is occurring in Indian
consumer behaviour due to changing lifestyles, rising aspirations
and the emergence of a dynamic youth culture.
Working with Sociovision, experts in social change, Jones Lang
LaSalle Meghraj has looked at the changes in Indian society,
their impacts on consumerism and how this is feeding through
to shopping behaviour and property demand. The research has
focused on the emerging youthful, urban and relatively affluent
Vanguard Class that is the driving force behind consumer
spending, new business activity, high-technology and workspace
innovations. This group includes circa 120 million people and
continues to expand. Half of them are under 25 years, and most
have excellent education. Within the vanguard class, there
are couple of leading edge segments that are exerting a major
influence on shopping behaviour:
Resourceful Young Women – The growth in the female
workforce has resulted in the emergence of “Resourceful Young
Women”, a group that are at the forefront of new India mores.
They are young, literate and resourceful; they place a heavy
emphasis on their careers and they have a very self oriented
motivation for spending. Resourceful Young Women have a
significant influence on Indian retailing – and 46% of them see
shopping as a source of pleasure (compared to 36% globally).
For this influential group, mall shopping is about “experience
and pleasure”, and not just about cost efficiencies.
Young Urban Managers are the vibrant backbone of the Indian
economy. They are highly entrepreneurial, hard working, money
focused and are keen networkers. Their shopping habits are
driven by a quest for status and economic advancement. With
their busy careers and limited leisure time, their shopping needs
are highly influenced by accessibility and convenience. The
demand for home delivery, particularly for convenience goods,
is very strong amongst this group.
 See www.sociovision.com
Among the vanguard class, our research identifies four different
mindsets described below, which are of prime interest for the
retail sector. Retailers and developers need create shopping
experiences that appeal to these groups:
Golden Boys and Girls – are young, university educated and
urbanised. Mumbai and New Delhi are their favoured cities.
They are thirsty for new consumer goods and designer brands,
especially IT products and services. They are the prime target
for international retailers, but interestingly they still have one
foot deeply implanted in traditional Indian family values. This
group will increasingly favour “hybrid” retail concepts that offer
the best of Western models, but also strongly reflect their Indian
cultures.
Cosmopolitans – are less “show off ” than the Golden Boys
and Girls. They incarnate the values of globe-trotting travel
and professional mobility. They are early adopters of new
technologies and buy into global brands. Bangalore is the natural
home of the “Cosmopolitans” and because of its cosmopolitan
demographics is frequently used as a test market for new retail
concepts.
Reactives – are older managers, who are modern and keen to
break away from rigid hierarchies and social boundaries. They
seek new skills, knowledge and professional success. However,
they are less at ease with change in Indian society. Kolkata is a
city in which the “Reactives” find their place.
Peaceful India – for this group consumption is linked to
aesthetics and refinement. They are modern in their openness
to gender equality and quest for reconciliation. Chennai is an
attractive place to live for the “Peaceful India”
Seven Drivers of Consumption
Our research identifies seven drivers of consumption, which are
important components of spending and retailing activity:
Thrill Pleasures – There is a strong desire in Indian society for
emotionally rewarding experiences. Mall shopping in India is
currently viewed as an “experience”, a leisure pursuit and a form
of entertainment, which has encouraged huge footfalls in new
shopping malls. However, the challenge for many mall retailers
and owners is converting the Indian “window shopper” from
browser to purchaser. Complexes that offer other entertainment
opportunities, such as multiplexes, are favoured by consumers.
Indians are avid cinema-goers, reflecting their thirst for evasion,
romance and new forms of vicarious consumption.
Fusion Fever - Whilst the Indian middle classes are attracted
to global brands, they are still committed to their traditions
and culture. We are seeing a fusion of modernity and tradition,
and the hybridization of Indian and “western” cultures, re-
enforced by the strong “Indian Brand”. This hybridization will
increasingly translate into new retail concepts.
Aesthetics - Indian society has a deep sense of aesthetics,
and home aesthetics are especially top of the mind to India’s
vanguard class. Home furnishings are central to the concept of
a good quality of life, and retailers catering for this segment will
see strong growth.
Novelty – The thirst for novelty is a fundamental characteristic
of the “New India”, which is not just confined to the young.
The taste for novelty is also driven by the need for learning
and advancement through education. The current novelty
value of shopping malls is high, but over time this will wane as
choice increases, and Indian shoppers will become much more
discriminatory over their choice of venue.
Technology - A taste for technology is a defining characteristic
of Indian socio-cultural profile. This translates into strong
interest in internet retailing which is increasingly popular,
particularly for electronics and advanced consumer durables.
An interesting dynamic is emerging in India, whereby
internet retailing is evolving in tandem with modern store-
based retailing. This will raise the demand for concept stores,
exhibition space and promotion zones within shopping malls.
Network Culture - Indian society has become increasingly
network based, and there is a strong urge to communicate,
interact and extend one’s mobility. Increasingly, malls are a focal
point for interaction and social exchange.
Advertising – tops the global rank in terms of society’s
attraction to advertising and “infotainment” as a source of
influence and information. Indian advertising is known for its
creativity and boldness.
India – Drivers of Consumption
Thrill Seeking
† A desire for “thrill pleasures” and emotionally rewarding
experiences
Fusion Fever
† Hybridization of Indian and “Western” cultures
Aesthetics
† Quest for aesthetics, especially home aesthetics
Innovation
† Taste for novelty driven by need for learning
Technology
† Taste for technology is a defining feature of the Indian
socio-cultural profile
Network Culture
† New IT and communications interacting with a more
flexible social fabric
Status
Winning Cities: INDIA RETAIL
† Quest for status is a key driver of the current consumer
boom
Source: Sociovision

Deep Diversity, Extreme
Expectations
India is a vast and complex society – its huge population is
highly diverse in terms of language, customs, ethnicity, habitat
and way of life. Even between India’s major cities there are
notable differences in consumer behaviour. Mumbai, Delhi
and Bangalore with their money-making ethic are home to
many of India’s “Golden Boys and Girls”; whilst the older more
sophisticated “Cosmopolitans” are attracted to these cities’
global orientation. Kolkata is a city in which the “Reactives” are
prevalent– its balance and cultural richness is valued by this
group. Chennai with its balance between modern and traditional
is an attractive place to live for both the “Reactives” and the
“Peaceful India” groups.
There are also notable differences in consumer habits,
preferences and loyalties by region. For example a number
of smaller northern Indian cities, such as Chandigarh and
Ludhiana, have developed relatively sophisticated consumer
markets and brand awareness, due to their high NRI (Non
Resident Indians) populations. In contrast consumers across
most of southern India continue to have relatively low exposure
to organised retailing.
Such regional diversity places an additional layer of challenges
for retailers and property developers that are seeking to create
pan-Indian operations. No single retail format is appropriate
for the whole of India, and formats need to be adapted for local
requirements. Market knowledge of local tastes is absolutely
essential.
From Fragmentation to Unification:
All in a Decade?
The rise of organised retailing – Traditional neighbourhood
retailers have historically dominated the Indian retail
environment. This is now changing rapidly, with organised
retailing growing by around 30%3 per year. Sales growth of
leading domestic retailers of 50-100% per year suggests that the
market is on target to beat market predictions that organised
retailing will account for nearly 10% of total sales by 2010.
Existing domestic retailers are consolidating and expanding
– The main retail players, that have traditionally been regional-
specific, are evolving into pan-India operations. The rise of large
domestic players such as Pantaloon/Big Bazaar, Shoppers Stop
Group, RPG and Trent/Westside are a key feature of today’s
market. All have very ambitious programmes of expansion
across the sub-continent, and are building up their management
expertise to support this growth.
New domestic entrants will be the companies to watch
– Existing retailers are being joined by numerous new market
entrants who are seeking a slice of India’s lucrative retail
business. Notably, several of India’s largest corporate houses,
such as Reliance, Bharti and the Aditya Birla Group are moving
 KSA Technopak, 2005
into retail in a big way. Reliance Retail have a very aggressive
expansion programme and is reported to be planning to invest
nearly $6 billion in 5,000 shops across India, with annual sales
of $25 billion by 2010. Also in late 2006, Bharti enterprises
announced its tie-up with Wal-Mart to roll out branded
stores across India. Both Reliance Retail and Bharti-Wal-Mart
will be the companies to watch – they are set to dominate
organised retail and could well become global operations. Their
understanding of Indian consumers, their impressive track
record in business and their deep pockets places them in a
strong position vis-à-vis existing players.
RELIANCE – A Major Force in Retailing
Reliance, one of India’s largest corporate houses,
headed by Mukesh Ambani, has an aggressive
expansion programme and is reported to be
planning to invest nearly $6 billion in 5,000 shops
across India. It is poised to become India’s
largest retailer, with aims of achieving annual
sales of $25 billion by 2010.
Reliance Retail opened their first
“Reliance Fresh” stores in Hyderabad in late
2006 attracting considerable global attention.
They are now rolling out stores at a rapid pace
across India through both organic expansion and
acquisitions of existing retailers. The company
also expect to debut their speciality stores and
hypermarkets during 2007. Reliance is also
focusing on supply chain management –
“the farm to fork” logistics chain – with the aim
of strengthening its procurement and
supply chain networks.
Foreign retailers are slowly moving in – Foreign retailers are
still restricted from fully participating in the retail boom. Partial
FDI relaxations in 2006 (allowing 51% investment in “single
brands”) are now enabling premium brands (such as Chanel,
LVMH, Gucci and Zegna) and mass brands (e.g. Starbucks) to
enter the market. While there is considerable pressure to allow
100% FDI, the local lobby to retain restrictions is strong, and
further deregulation is likely to be slow and piecemeal. This is
providing a short term window of opportunity for domestic
players to embed and expand their operations.
Nonetheless, several international retailers are already property markets in Asia, Europe and North America. China,
operational through different routes: for example currently has over 300 million sq ft of completed
shopping malls.
Franchises – e.g. M&S, Pizza Hut, McDonalds and Nike are
already operational. Indian Shopping Mall Development
Wholesaling – Metro (Germany) and Shop Rite (South Africa) ‘000 sq ft
are already operational through the wholesale “cash and carry” 70,000
route (where 100% FDI allowed). 60,000
100% FDI in manufacturing – e.g. LG Electronics and Levis are 50,000
permitted to sell directly.
0,000
However, the attractions of India retailing are so strong, that
0,000
despite restrictions, many international retailers are seeking
market entry through JVs with local players, and are stepping 20,000
up sourcing operations. Companies such as Tesco and IKEA are
10,000
all targeting the market and exploring business opportunities.
The eventual arrival of major international retailers will create a 0
2000 2001 2002 200 200 2005 2006 2007 2008
much more competitive environment for retailers, and through
knowledge transfer will lead to greater efficiencies and the
7 cities: NCR, Mumbai, Bangalore, Kolkata, Hyderabad, Pune and Chennai
introduction of higher international standards. Source: Jones Lang LaSalle Meghraj Research

The Property Response – Emergence of a new breed of pan Indian developers – The
retail development market has so far been highly fragmented,
Accepting a Steep Learning Curve with each region dominated by a different set of local
Shopping mall development - reality vs hype? Since the developers. Most local developers have lacked both expertise
completion of India’s first mall in 1999, India has seen the steady and strategic vision, which has consequently compromised on
migration of retailing from traditional formats into retail malls. the quality of malls that are being built. However, the recent
As recently as 2002 there was barely one million sq ft of space in and planned activities of leading developers such as DLF,
only a handful of shopping malls. By the close of 2006, this had Emaar-MGF, Unitech, Prestige Group and Raheja points to
risen to around 90 malls totalling 19 million sq ft across seven
cities.
Based on domestic developers’ intentions, the stock could more
than double to over 40 million sq ft by the end of 2007 and
to up to 60 million sq ft by 2008. However, there is a
widening gap between developers’ claims and
what is actually happening on the ground,
and we estimate that the end 2007 stock
could be between 15-25% below
“official” developer estimates.
Even if all the space is
completed on time, in
per capita terms stock
levels by 2008
will still be
significantly
below all
main
Winning Cities: INDIA RETAIL

 Bangalore, Chennai, Delhi, Hyderabad, Mumbai, Kolkata and Pune.

11
the emergence of a select group pan-Indian developers with a
strategic vision and ambitious national expansion plans; that
are raising capital using various methods including domestic
and foreign public listings and private equity; diversifying their
formats and gaining the necessary management expertise. For
example, DLF, which is planning listing in 2007 is aggressively
targeting national growth, with the reported aim of developing
up to 100 malls across 60 cities within the next 8-10 years.
DLF – A Pioneering Developer
DLF, India’s largest real estate developer
was among the first movers into shopping mall
development, when it launched the 250,000 sq ft
City Centre Mall in Gurgaon in 2000. The company
has a very strong presence in the NCR.
DLF is planning a listing in 2007 with aggressive
plans to become a truly pan Indian player.
They already have portfolio in most of India’s
main cities, but now are also targeting Tier
III cities of Punjab viz. Ludhiana, Jalandhar,
Chandigarh and Amritsar, alongwith Jaipur and
Kochi. They have a reported aim
of developing up to 100 malls across 60 cities
within the next 8-10 years.
DLF are broadening their formats to include
speciality malls, big box retailing and integrated
malls within SEZs. They are also moving into
“lease models” and “revenue share model”.
Poor quality shopping malls – In the competitive rush to build
shopping malls, we assess that over 90% of the current and
planned shopping mall stock falls below international standards,
in terms of specification and design:
† Most malls developed earlier in the decade were strata titled.
Currently circa 80% of mall units are strata title versus only
20% leased. A recent survey by Jones Lang LaSalle Meghraj
indicates that three-quarters of domestic branded retailers
prefer to lease rather than purchase retail units. Developers
are beginning to respond to this trend, with more mall
developers are now holding on to their properties. Local
family retailers still prefer to buy rather than lease.
† Construction standards are inherently poor, with developers’
further compromising standards due to rising construction
costs.
† Mall configurations are poor in terms of pedestrian
access, corridor width, linkages between floors and the
amount of space allocated for food courts, entertainment
areas, promotion zones, etc. Service areas for delivery and
movement of merchandise are often inadequate.
† Many malls have a severe lack of parking provision, which is
compounded by poor linkages with the road infrastructure.
† No emphasis on tenant and trade mix
But the biggest challenge for most Indian malls is the poor
quality of the surrounding infrastructure and lack of integration
with neighbouring residential areas, which often leads to
significant congestion. A combination of poor infrastructure
(both transport and utilities), planning and zoning legislation
makes it inherently difficult for developers to provide an
attractive retail destination.
Despite their inferior quality, most shopping malls still
command large footfalls. But, many will fail the test of time as
more choice becomes available for the Indian consumer, who
will become increasingly discerning over their choice of retail
destination.
India: Lease Preferences
Choice of Lease Model
Ownership
model Revenue-share
26% model
35%
Lease model Fixed rent model
74% 65%
Source: Jones Lang LaSalle Meghraj Research
Inadequate asset management – Most malls are poorly
managed at both an operational/tactical and strategic level.
This translates into problems ranging from low maintenance
and cleaning, and various health & safety risks, through to
inappropriate tenant mixes. Most owners continue to struggle
with translating high footfalls into higher revenue. But this is
gradually starting to change with the introduction of outsourced
professional mall management to manage tenant mix, facilities,
promotion, etc.
The benchmark shopping malls – There are nonetheless a few
trophy malls, such as the Prestige Forum (in Bangalore) and
Inorbit (in Mumbai), which have been particularly successful,
and are closer to the standards expected by international
Winning Cities: INDIA RETAIL
investors. They are large, well planned and constructed malls,
actively managed and promoted, incorporating entertainment
and adequate parking. Select City Walk (in South Delhi)
which is expected to become operational during 2008, a large
multi use scheme, will set a new benchmark for shopping mall
development in India. A revenue share model is being adopted
13
 whereby tenants pay a minimum guaranteed rent as well as
a variable component based on total sales. We expect more
mall operators to adopt this model to ensure the continued
commitment of both owners and tenants to drive growth and
improvement.
Diversification of formats – As the market grows and matures,
we are witnessing a gradual diversification of formats. At the one
end of the scale, the market is seeing growth in large one-stop
malls, combining mixed use concepts – eating, multiplexes,
entertainment and infotainment, as well as serviced apartments.
At the other end of the scale, we expect to see the construction
of more neighbourhood shopping malls, which incorporate
more convenience stores and food supermarkets. There will also
be more speciality malls, some catering for luxury brands. “Big
Box” formats will appear over the next two years, introduced by
the likes of Reliance and Wal-Mart.
Strong asset price growth is unsustainable – With retailer
demand outstripping supply, double digit rental growth has
been a feature of most major metros since 2004, and growth
is continuing into 2008. Major retailers are further fuelling
asset price growth in their rush to acquire space and to impede
the competition, while some developers are deliberately
delaying construction to increase market values. Conversely
smaller retailers (with tight margins) are being squeezed
and increasingly discouraged from occupying space due to
prohibitively high asking rents. The speculative nature of rental
growth suggests that, despite the continued strength of retailer
demand, current rates of asset price growth are unsustainable.
The market is not immune to an emerging market correction as
more supply comes on-stream.
Retail Rental Values in Major Cities
INR per sq ft pm
400
350
300
250
200
150
100
50
0
Delhi Mumbai Bangalore Chennai Pune Hyderabad Kolkata
2003 2004 2005 2006 2007
Source: Jones Lang LaSalle Meghraj Research
Active investor interest - Though most funds do not have
specific retail allocation targets, all of India’s major real estate
Winning Cities: INDIA RETAIL
funds are seeking retail investments at yields in the range of
10-11% (either as standalone retail developments or mixed
use developments with a retail component). Several specialist
retail real estate funds include the likes of Kshitij 1, Horizon
International and Prozone.
14
International investor interest is growing. Singaporean investors,
such as CapitaLand and GIC, and several US and UK investors/
developers are scouring the market. CapitaLand has invested
INR 338 crore (USD 75 million) in the Horizon Fund for four
projects, whilst Liberty Capital has taken a 25% stake INR 200
crore (USD 45 million) in Prozone.
Investor interest will undoubtedly remain strong, with investors
keen to participate in a market with an upward growth
trajectory. However, the investment market is in a nascent stage,
and many investors (particularly internationally investors)
will adopt a more cautious “wait and see approach”, awaiting
further modernization of the retail infrastructure and the lifting
of FDI barriers.
Specialist Retail Funds
Kshitij Investment Advisory Co Ltd (KIAC) is the
real estate fund management company promoted
by the Future Group (owners of Pantaloon and
Big Bazaar). KIAC plans to develop over 50
schemes totalling 16 million sq ft across India.
The company has introduced the Kshitij Venture
Capital Fund (KVC) and the Horizon International
Fund. Kshitij 1 is committed to developing
13 retail projects across India’s main cities.
The fund closed at USD 80 million in 2005.
The Horizon International Fund is aimed at
foreign investors coming into India under the
100% FDI norm. The fund is also reported
to be setting up Kshitij 2, which will focus
on projects in Tier III cities.
Prozone Prozone Pvt Limited is a subsidiary
company of Provogue, one of India’s largest
fashion brands. Prozone has been established
to develop and manage one of India’s largest
shopping mall networks with over 50 retail malls
with an estimated investment of USD 1 billion
planned over the next 5 years. The company is
tying up with a number of developers – such
as a JV with Omaxe, a leading northern India
developer, with which they plan to develop 10
shopping malls. Liberty International have taken
a 25% stake in Prozone-Liberty will build six large
shopping malls in Tier III cities such as Surat,
Rajkot, Aurangabad, Mysore and Indore.
Traditional “High Streets” will adapt – While the property capita income, savings and expenditure; household profile
market is firmly focused on new shopping mall formats, and economic growth measures. These indicators enable a
traditional “high streets” will continue to be the mainstay of quantitative appraisal of each city’s demographic and economic
the Indian retail scene. The pull of traditional neighbourhood fundamentals, and provide an indicator of their potential to
retailers, particularly for local brands will remain very strong; develop as vibrant retail locations.
“High Street” retailers have the advantages of proximity,
Retailer Demand Indicator – based on the operational and
familiarity and high personal service. Culturally Indian
planned presence of a basket of major domestic retailers (such as
consumers expect and receive first class personal service from
Pantaloon, Westside and Shoppers Stop) as well as domestic and
local retailers, and are often better positioned to respond to
international niche (“vanilla”) retailers.
the huge demand for home delivery. But competition will
increase, particularly as some local retailers move into malls Retail Supply Indicator – based on the number of current and
and it will become a credible alternative to shop for local retail planned shopping malls.
in newer formats. Traditional retailers will fight back, and the
“high streets” will be forced to adapt, which will provide new City Retail Potential Model
opportunities for the property market to cater for this important
local component of the Indian retail scene. Moreover, many 50 CITIES
traditional retailers still occupy illegal premises, and the policy
adopted by the Delhi government to close/demolish illegal stores Socio-Economic Retailer Retail Supply
is likely to be rolled out to other Indian cities, forcing traditional Fundamentals Demand
retailers into the organised sector. † Size: Total City Income Basket of 20 Shopping
† Wealth: Income, Retailers mall stock
Retail property market is expanding into new geographies Savings, Expenditure
– Many retailers and mall developers are looking beyond India’s
† Existing
† Socio-Economic Stores Shopping
major cities, and selectively focusing on smaller cities which Profile (% in SEC A/B) † Planned mall
offer huge potential. These cities offer favourable opportunities † GDP Growth Stores construction
for retailers due to growing consumer markets, considerable
latent demand for branded goods and lower property costs. They RETAIL POTENTIAL SCORE RETAIL ACTIVITY SCORE
are also less saturated than India’s main metros, and are less
likely to face future competition from international players.
In the following section we look at India’s emerging retail CITIES HIERARCHY
geography, and assess current property market conditions and
future prospects in both the major cities and those smaller MATURING
emerging cities that are starting to appear on the radar screen of
the retail property market. TRANSITIONAL

HIGH GROWTH

The New Retail EMERGING

Hierarchy NASCENT

Source: Jones Lang LaSalle Meghraj Research

and Property Our analysis has identified a five-level classification of cities:

Opportunities 1. Maturing Cities

Assessing City Retail Potential
To create a view of the where, how and when each of India’s
cities with a million + population will emerge as interesting
The National Capital Region (Delhi) and Mumbai dominate
India’s organised retailing sector. Malls have been a feature
of these two metros since 1999, but it is only since 2003 that
volumes have increased markedly. These two vast metro regions
currently account for around half of all of India’s organised
retailing. By 2008, they will still contribute over 40% of national
Winning Cities: INDIA RETAIL

locations for property development, we have consolidated all

the intelligence, information and views we have on 50 Indian organised retail activity; although this proportion is expected
cities in order to create a new retail city classification. The to decline over the longer term as retailing opportunities grow
classification is based on an analysis of three sets of indicators: elsewhere (see page 21-23).

Retail Potential Indicator – based on a basket of indicators The NCR and Mumbai have by far the highest number of
including metropolitan area population and total income; per shopping malls in operation and planned. Most pan-Indian
17
 retailers have a multiple presence, they are the launch pads for
most new retailer entrants and with by far the largest number of
“super-rich”, and these cities are the hubs of luxury brands. They
are firmly on the radar of screen of international retailers and
property investors.
Competition within the NCR and Mumbai will intensify as
supply grows and there is risk of saturation in some market
segments by 2008. Strong asset price growth and difficulties in
land procurement make for a challenging environment for both
retailers and developers. Nonetheless, there are notable market
gaps and both metros are sufficiently large to accommodate a
wide variety of new formats.
Opportunities are likely to arise in:
† Developing large one-stop malls that combine mixed use
concepts, integrating retail, entertainment, eating and
residential uses.
† Catering for the numerous luxury brand retailers that are
now targeting India’s two main metros. Currently, luxury
brands are only largely present in major five star hotels (such
as The Oberoi and Imperial in Delhi and the Taj Mahal
Palace in Mumbai), but there is strong demand from these
retailers for showrooms in both large shopping malls and
speciality malls.
† Responding to the requirement for “Big Box” formats; a
format that is likely to emerge over the next couple of years.
† Developing more accessible neighbourhood malls and
hypermarkets within the cities. Most current and planned
schemes are remote from the main residential areas, and low
car penetration makes shopping malls inaccessible to many
consumers.
† Targeting the booming middle class residential suburbs, such
as Greater NOIDA (NCR) and Navi Mumbai and Thane
(Mumbai) where many of the IT/ITES companies are based;
and focusing in particular on those suburbs that have yet to
see significant mall development.
National Capital Region
The National Capital Region has been and continues to be the
leader in mall culture in India. Organised retailing in the NCR is
twice the size of Mumbai, both in terms of shopping mall stock
and retailer presence. Rising income levels, increasing demand
for branded products and wider acceptance of mall culture (than
elsewhere in India) has led to massive growth in the shopping
mall stock. Retailers are also attracted by the consumer profile of
the NCR, with over 40% of households in SEC groups A and B.
At present the total mall stock stands at 8.2 million sq ft, of
which 2.6 million sq ft is within the city of Delhi. Most stock,
however, is concentrated in the main suburban regions of
Gurgaon (at 2.6 million sq ft), Ghaziabad (1.2 million sq ft) and
Winning Cities: INDIA RETAIL
NOIDA (1.1 million sq ft).
Organized retailing first came to the city with the construction
of Ansal Plaza in South Delhi in 1999. However, it wasn’t until
2001 that the NCR saw the first shopping mall development
boom, focused on the suburban market of Gurgaon, due to
its booming IT/ITES sector and the availability of larger plots
18
of cheap land. Gurgaon saw the development of several large
format malls by developers such as DLF and MGF. NOIDA
followed Gurgaon into the retail boom in 2003, and more
recently Ghaziabad and Faridabad have both emerged as major
retail sub-markets. The city of Delhi is also witnessing large scale
mall development, which has been made possible by the release
and auction of land by the Delhi Development Authority.
With a very large number of malls in the pipeline (the mall
stock could potentially more than double to 22 million sq ft by
2008-09) the NCR will continue to lead India’s organized retail
market. We expect the suburbs of Faridabad, Ghaziabad and
Greater NOIDA to be the focus of future retail development.
Manesar on National Highway 8 connecting the NCR to the city
of Jaipur is also likely to witness high retail interest. HSIDC has
approved large commercial projects, and several major MNCs
have commenced operations. Two Special Economic Zones by
DLF (NCR’s largest developer) and Reliance are also proposed.
These new suburban areas have large tracts of low cost land, and
will attract high developer interest for mixed use development.
Connaught Place, South Extension, Khan Market and Greater
Kailash are Delhi’s prime “high street” locations. They are
vibrant retail destinations with recognised brands; and they
will continue to attract significant consumer activity. Lack
of expansion space in prime “high streets” is likely to lead
to further price rises. The Delhi government’s policy of
demolishing/closing illegal stores will re-enforce the migration
towards organised retailing.
National Capital Region
Shopping Mall Development, 2000-2008
‘000 sq ft
10,000
9,000 Existing Stock Future Supply
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008
Delhi Gurgaon NOIDA Ghaziabad Faridabad
Source: Jones Lang LaSalle Meghraj Research
Mumbai
Mumbai’s first mall was completed in 1999 in the Central
Business District (CBD). Since 2003 mall development has
increased massively, expanding from the CBD to all parts of the
island city and suburbs. Currently, Mumbai has a shopping
mall stock of 4.0 million sq ft, a figure that could rise to around
15 million sq ft by 2008-09.
SBD Central (Worli, Prabhadevi and Mahalaxmi) and SBD
North (Bandra, Andheri, Juhu and Santacruz) were the
first micro-markets outside the CBD to see significant mall
development in 2002-2003. Since then there has been steady
growth in the number of malls and several new developments
are slated for completion by 2008 in the western suburban
regions.
Another hot retail market is likely to be in the Parel area (in SBD
Central), where the sale of mill lands has created considerable
opportunities for mixed use development.
Other western suburban regions such as Malad and Goregaon
have seen the development of integrated townships such as
Mindspace. To cater for these residential townships, Raheja
built the In-Orbit mall, which has become one of India’s most
successful malls.
The central suburban regions of Powai, Mulund, Navi Mumbai
and Thane are emerging as Mumbai’s next hot retail markets,
boosted by the growing activities of the IT/ITES sector and
rapidly expanding residential areas. Both Navi Mumbai and
Thane are set to witness huge mall development in the near
future. We expect that the central suburbs of Powai, Mulund,
Navi Mumbai and Thane will overtake the western suburbs in
terms of mall space.
Property, construction and labour costs are also well below the
NCR and Mumbai.
The majority of major domestic retailers and new market
entrants, irrespective of their business models, are already
expanding in these cities or have plans to open new stores.
Testimony to the strength of Tier II cities, Reliance Retail chose
to open its first concept store in Hyderabad. As with Tier I cities,
the key opportunities are in large one-stop malls, speciality
malls, neighbourhood malls and hypermarkets and “Big Box”
retailing.
Kolkata, Pune and Hyderabad currently have the largest
shopping mall floorspace of the transitional cities. But Bangalore
has the most aggressive mall construction programme, with
a wide variety of retailers attracted to the city’s increasingly
cosmopolitan population. Chennai has so far lagged the other
transitional cities in terms of mall development, but is expected
to start to catch up by 2008.
India’s Shopping Mall Stock (est. by end 2007)
Primary and Secondary Cities
Pune 6% Chennai 3%

Mumbai’s “high streets” such as Bandra Linking Road, Colaba

Ahmedabad 8% Delhi/NCR 41%
Causeway, Breach Candy and Lokhandwala will continue to
attract the Mumbai-ites. Hyderabad 4%
45 milion sq ft
Mumbai, Shopping Mall Development Kolkata 10%
2000-2008
‘000 sq ft Bangalore 8%
9,000 Existing Stock Future Supply
8,000
Mumbai 20%
7,000
6,000 Source: Jones Lang LaSalle Meghraj Research
5,000
4,000
3,000 Shopping Mall Development, 2000-2008
2,000 ‘000 sq ft
1,000 22,000
0 20,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 18,000
CBD SBD-North SBD-Central
16,000
Suburbs-Navi Mumbai & Thane Suburbs-Others
14,000
Source: Jones Lang LaSalle Meghraj Research 12,000
10,000
8,000
2. Transitional Cities 6,000
Bangalore, Kolkata, Hyderabad, Pune, Chennai, Ahmedabad 4,000
2,000
India’s transitional retail cities of Bangalore, Kolkata, Hyderabad, 0
Pune, Chennai and Ahmedabad are now firmly making their NCR Mumbai Bangalore Kolkata Pune Chennai Hyderabad
mark on the retail sector. Whilst organised retailing is a more 2000 2001 2002 2003 2004 2005 2006 2007 2008
Winning Cities: INDIA RETAIL

recent phenomenon than in the NCR and Mumbai, they are

Source: Jones Lang LaSalle Meghraj Research
catching up as both retailers and developers tap into their large
middle classes. By 2008, these six transitional cities will account
for one-third of India’s organised retailing. Retailers are attracted
by their increasingly vibrant corporate sectors, high economic
growth rates, above average incomes and large middle classes.
21
 Bangalore Bangalore, Shopping Mall Development
Bangalore stands out among the transitional retail hubs. Already 2000-2008
very well established as one of India’s primary office hubs, ‘000 sq ft
boasting an IT/ITES sector of global significance, the city is 6,000
Existing Stock Future Supply
starting to catch up in retail terms. Retailers are attracted by the 5,000
city’s booming economy, with double digit economic growth
4,000
and average per capita income higher than either Delhi or
Mumbai; Bangalore also has a cosmopolitan population which 3,000
is continually being enriched by new migrants from across India
2,000
as well as overseas. The city is often used as a test market for new
entrants and retail concepts due to its young and cosmopolitan 1,000
demographics. 0
2000 2001 2002 2003 2004 2005 2006 2007 2008
Currently, Bangalore has a shopping mall stock of only
1.0 million sq ft (below most other main cities). The city has Prime Secondary Suburbs

a severe shortage of organized retailing; existing malls have
virtually 100% occupancy, and the best malls (such as Prestige
Forum) are attracting very high footfalls. Developers are now
responding to the shortages and the city has a very aggressive
construction programme. The mall stock could potentially rise
to over 6.7 million sq ft by 2008, with 2.5 million sq ft due for
completion in 2007 alone. Much of the space under construction
has already been pre-leased.
Given the lack of organized retail space, Bangalore has
prominent CBD “high streets” such as CMH Road and Brigade
Road, which will continue to attract retailers. Jaya Nagar 4th
block and CMH Road are also seeing high levels of leasing
activity.
Although mall construction activity is occurring across all
quadrants of the city, over the longer term we expect particularly
strong growth in organized retail on Bellary Road, near to the
new international airport which is scheduled for completion by
2008. Suburban Business Districts such as Whitefield are also
expected to see significant mall development.
Source: Jones Lang LaSalle Meghraj Research
3. High Growth Cities
Chandigarh, Jaipur, Ludhiana, Lucknow, Kochi, Surat,
Vadodara
A group of tertiary cities have over the past year entered a
high growth phase. These high growth cities, mainly located
in northern India, are perceived by retailers as the “next retail
destinations”. They are on the radar for major national and
international retailers, attracted by high incomes and strong
brand awareness. Chandigarh, Ludhiana, Jaipur and Lucknow
lead the pack, characterised by high levels of shopping mall
development and significant retailer interest. Research on
retailer preferences by Jones Lang LaSalle Meghraj identifies
the Punjabi city of Ludhiana as the most favoured tertiary city.
Incomes are well above the national average and consumers
have a high exposure to international brands due to the strong
influence of its NRI population.

Indian Tertiary Cities – Retail Activity v Potential

Retail Activity Score
1.2

Ludhiana
Jaipur
1.0 GROWTH
Chandigarh

0.8 Amritsar Indore Lucknow

EMERGING
Kochi
0.6 Jalandhar
Agra Bhubaneshwar Nashik Vadodara
Mangalore
0.4 Coimbatore Vizag Surat
Nagpur Kanpur
NASCENT Allahabad Goa
Winning Cities: INDIA RETAIL

Varanasi Jodphur Patna Meerut

0,2 Mysore
Rajkot
Aurangabad
Jabalpur Sonipat Bhopal Guwahati Jamshedpur
Srinagar Asansol Vijayawada Thiruvananthapuram
0 Madurai Kolhapur
Solapur Dhanbad Ranchi
0.4 0.6 Panipat 0.8 1.0 1.2 1.4
Retail Potential Score
Source: Jones Lang LaSalle Meghraj Research

22
Most high growth cities are located in northern India where
there is strong brand awareness. The exception is Kochi in
southern India, a favoured destination for the IT/ITES sector.
A sharp rise in mall development is expected in 2007/2008
in Kochi, with schemes by both the Kshitij Fund (a retail
investment fund of the Future Group) and Lulu (a division of
EMKE Group of Dubai) in the pipeline.
4. Emerging Cities
Amritsar, Indore, Jalandhar, Mangalore, Nashik,
Bhubaneshwar, Agra, Vizag, Nagpur, Coimbatore, Kanpur,
Goa, Allahabad, Mysore, Jamshedpur, Thiruvananthapuram
On the basis of the future plans of major hypermarkets and
department stores, a group of 16 emerging cities are likely to
be the next growth markets over a three year horizon. Factors
such as growing incomes, rising aspirations, scarcity of branded
stores and growing corporate activity are increasing the demand
for organised retailing. In cities such as Nagpur, Indore, Nashik,
Bhubaneshwar, Vizag, Coimbatore, Mangalore, Mysore and
Thiruvananthapuram, IT/ITES companies are rapidly expanding
their workforces, which in turn is stimulating retailer activity.
These cities currently represent among the most interesting
locations for property developers - retailers are combing these
cities for opportunities, with demand exceeding supply. This
group also includes several major tourist destinations such as
Amritsar, Agra and Goa, as well as a number of southern Indian
cities which have so far been less impacted by organised retail
than their northern Indian counterparts.
These smaller cities have consistently outpaced the larger metros
in economic growth rates, and they are witnessing strong growth
in incomes. But even more significant is the changing lifestyles
and aspirations, and the fundamental shift in the consumer
mindset in smaller cities.
Low property costs, lower operating costs and high brand
acceptance in smaller cities are enabling retailers to achieve
better margins than in India’s main cities. Retailers are
introducing contemporary retail formats but at a smaller
scale, with mall sizes typically between 100,000-150,000 sq ft
compared to 500,000 sq ft in the larger metros.
5. Nascent Cities–The Next Frontier
Patna, Bhopal, Meerut, Asansol, Varanasi, Kolhapur, Sonipat,
Madurai, Rajkot, Jabalpur, Dhanbad, Vijayawada, Srinagar,
Panipat, Aurangabad, Solapur, Ranchi, Jodhpur, Guwahati
A further 19 smaller cities (most of which have populations
of between 1-1.5 million) are classified as “nascent”, largely
reflecting low incomes and limited corporate activity. Organised
retailing is currently very limited, but they are nonetheless on
the “watch list” of pioneering retailers and mall developers that
are seeking to benefit from “first mover advantage”. Progress
towards the development of an active organised retail sector in
these cities is likely to be slow, although market conditions can
change rapidly should their local economies be boosted by new
corporate arrivals.
Jodhpur, Vijayawada and Varanasi are amongst the most popular
tourist destinations in India, and their potential for organised
retail is higher than other “nascent” cities. Others cities have
significant manufacturing sectors, which have attracted
department stores and hypermarkets. Pantaloon’s flagship brand
“Big Bazaar” is already present in the majority of these cities.
Developers like Prozone, are active in cities such as Aurangabad
and Rajkot.
Final Observations
Retail Developers Must Fight for a
Place in the Modernisation Process
This report has shown how changes in consumer behaviour
and the rapid transformation of India’s retail scene have
bought the Indian retail real estate market to the point of
“lift-off ”. Significant new opportunities across a broad range of
geographies and formats are being captured by an increasing
number of domestic real estate developers and investors, all
eager to participate in a market that is still at an early stage of
evolution. However in the rush to expand retail formats and
build new malls, many schemes fall well below international
standards. As more choice becomes available for the Indian
consumer, a lot of malls and retail concepts will fail the test
of time. Moreover, most retailers will struggle to implement
aggressive expansion plans due a lack of suitable and affordable
property, inefficient logistics operations and shortages of
manpower skills. A rapidly growing, but highly challenging
retail environment will inevitably result in many losers as well as
winners.
The Next Stage
The next stage in the evolution of the Indian retail market
will be when international developers and financiers start to
change the shape of India retailing, joining an elite group of
visionary domestic developers, owners and retailers who have
the scalability, the teams, the processes and the logistics required
to flourish in this rapidly growing retail environment. In the
next report in the Jones Lang LaSalle Meghraj series on India
Retail Futures, we will look at the state of Indian retailing on
the ground, and drawing on international best practice, we will
provide insights into how new retail development is likely to
evolve in terms of design, style and management, as the Indian
retail sector truly becomes part of the global real estate market.
Winning Cities: INDIA RETAIL
23
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