Rentals of retail spaces may rise with more FDI

Retail space rentals in India may go up as big global players try to expand rapidly in the country in the medium to long term following the government's decision to relax FDI norms in the sector further, according to realty consultants.

"A lot of international brands will look at entering India and scout for retail spaces. The vacancy level will come down for the existing supply available in the market," Cushman & Wakefield (C&W) India Director (Retail Services) Jaideep Wahi told PTI.

Asked about the rentals, he said there would be an upward trend in successful shopping centres and high-street sites, but declined to give any percentage of increase.

Expressing similar views, CB Richard Ellis (South Asia) Chairman and Managing Director Anshuman Magazine said: "There could be marginal increase in rentals of major high-street destinations and shopping centres as there is very limited supply there."

Asked about demand-supply outlook, he said there would not be any immediate impact. However, in medium-to-long-term, demand of retail spaces would improve, ultimately leading to increase in supply.

While welcoming the government's move, Magazine said: "This is of course a very good move, but it does not mean retailers will come overnight. One has to look at global situation, which is not very encouraging."

Property consultant DTZ India Chief Executive Officer Anshul Jain said it would take about 18 months for demand to pick up for retail spaces.

On rentals, he said: "There will definitely be an increase in retail rentals, but I don't see huge spike in it because beyond a point retailers cannot afford it."

As per a C&W study, as on June, rentals for high-street destinations such as Khan Market in Delhi stood at Rs 1,200 per sq ft per month.

Rentals in other high-street markets like Connaught Place, GK-I (Delhi), Linking Road (Mumbai) and Brigade Road (Bangalore) stood at Rs 650, Rs 550, Rs 685 and Rs 440 per sq ft a month respectively.

For shopping malls, the monthly rentals for Elgin Road (Kolkata) stood at Rs 533 per sq ft, while those of Lower Parel (Mumbai) and South Delhi (New Delhi) were at Rs 480 and Rs 450 per sq ft respectively in June.