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Our Bureau

New Delhi , March 10

AFTER the big metros, it is the turn of tier-II towns — with population of up to a million — to become the focus of the retail industry boom.

According to a research paper by KSA Technopak and ICICI Property Services, tier-II towns and cities will witness major retail format developments of less than 1,00,000 sq. feet by 2006. It says that the retail boom, 85 per cent of which has so far been concentrated in the metros, will percolate to smaller cities and towns and that the contribution of these tier-II cities to total organised retailing sales will grow to 25 per cent.

Prominent tier-II cities and towns that are witnessing a pick-up in activity include Surat, Lucknow, Dehradun, Vijaywada, Bhopal, Indore, Vadodara, Coimbatore, Nasik, Bhunaneshwar, Varanasi and Ludhiana.

Availability of cheaper real estate options coupled with brand acceptance among consumers in these cities is leading retailers and property developers to achieve breakeven much faster compared to larger cities. Average rental values for groundfloor space range between Rs 50-60 a sq. foot a month as opposed to Rs 100-120 a sq. foot a month in some of the prominent metropolitan cities.

Also, across the top 14 Indian cities, 93 malls are expected to come up by 2006. "Property developers are today creating retail real estate infrastructure at an aggressive pace to cater to the increasing demand from retailers. This has also been fuelled by proactive government initiatives such as the Delhi Development Authority (DDA) releasing real estate space in prime retail areas," said the KSA Technopak Chairman, Mr Arvind Singhal.

He said India is currently in the `development' phase, marked by a rapid pace of creation of retail infrastructure. The country's Rs 9,30,000-crore retail industry is expected to grow at 5 per cent every year; organised retail is expected to grow to Rs 35,000 within 2005 and to Rs 1 lakh crore by 2010. The research paper also forecasts investments in the retail sector to be between Rs 2,000 crore and Rs 2,500 crore in the next two-three years and over Rs 20,000 crore by 2010.

Within this year, almost 10 million sq. feet of mall space is expected to come up across 11 major cities, with most malls concentrated in North India. In 2006, over 18 million sq. feet of mall space is expected to come up, with the National Capital Region continuing to be the focal point for mall development.

KSA has also hailed the Government's move to allow foreign direct investment in real estate, saying this will further accelerate the pace of development of retail real estate infrastructure as foreign developers enter the market. The quality of construction is also likely to improve, as foreign players bring with them expertise gained from experience in developing malls in mature markets to build similar destinations in India.

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