76
sq. ft. of office space demand through 2009-2013, respectively. (Source: Cushman and Wakefield: Survival to
Revival, 2009)
The key growth drivers in the commercial real estate sector are:-
(i)
Growth in the IT/ITES sectors: Primary growth driver of commercial real estate is the IT/ITES sector.
According to NASSCOM estimates, IT/ITES industry is expected to grow to US$ 148 billion by 2012.
(ii)
Growth in knowledge and technology intensive sectors: Several other sectors such as financial services,
biotechnology, telecom, pharma, insurance, and consulting businesses are witnessing growth and have
added to the demand
(iii)
Significant growth in FDI: - Progressive liberalization and easing of FDI norms in India across various
sectors have paved the way for growth in FDI. This has further led to burgeoning demand for office space
from multinational companies and other foreign investors.
The Retail Segment
The organized retail sector accounts for approximately 4% of India’s overall retail real estate sector. The retail
industry in India has witnessed a slowdown in the past year after growing at a CAGR of 28% between 2005 and
2008. The industry is expected to grow at a CAGR of 14% in the short term and 19% over the next 5 years.
Organized retail penetration has increased to about 5.6% in 2009-10, which is further expected to increase to
about 7.3% by 2012-13. In the past few years, India’s organized retail industry has posted high growth given
improvement in key driving factors namely lavish lifestyles, high disposable incomes and a propensity to spend.
Cushman and Wakefield's research estimates that cumulative demand for retail space across India will reach 43
million sq. ft. by 2013, of which the top seven cities in India are likely to account for nearly 34.6 million sq. ft.
This demand is expected to be concentrated in Bangalore, Mumbai and NCR which will constitute
approximately 46% of the total estimated pan-Indian demand between 2009 and 2013. According to the
Investment Commission of India, as cited by Cushman and Wakefield's research, organized retail is expected to
grow from 5% to 15.5% by 2016, which highlights the potential for pan India expansion amongst retailers.
(Source: Cushman and Wakefield: Survival to Revival, 2009)
Accordingly, retail rentals almost doubled between 2006 and 2008 in certain major cities, particularly with
respect to high street space. This rise in rental rates was witnessed notwithstanding the fact that a great deal of
retail supply is in the pipeline in many of these cities. The drivers for this increase in rental rates have been the
dearth of quality retail space and the ambitious expansion plans of certain retailers. Some of the growth in retail
rates has been tempered by the global financial crisis and general liquidity crunch. (Knight Frank, India Retail
Market Review – Q3 2008)
The key growth drivers in the retail segment are: (Source:
www.ibef.org
)
(i)
Rising Consumerism: With growth in India’s economy over the past two decades, the spending power of
Indians has also increased manifold. Household disposable income has roughly doubled since 1985. The
combination of rapidly rising household incomes and a growing middle-income population has led to a
significant increase in overall consumer spending. Organized retail sector owes much of its growth to the
increased rate of urbanization, the young population, youth culture, and rising consumer credit usage.
(ii)
A large part of the expected growth in the retail industry in India can be attributed to growth in the Indian
middle class. India's vast middle class and its virtually untapped retail industry are key attractions for global
retail giants wanting to enter newer markets.
(iii)
Foreign Direct Investment- In 2006, the Government allowed 51% foreign direct investment in single brand
retailing in order to attract foreign investment in production and marketing, improve the availability of retail
goods and increase the competitiveness of Indian enterprises through access to global designs, technologies
and management policies.
(iv)
Growth in organized retailing: Retailing in India is witnessing a huge makeover
77
(v)
Entry of international retailers into India: India is attracting large international retailers to its doorstep.
Many international retailers are already present in the country primarily through the franchisee route and are
actively considering expansion. Besides several other large retailers are planning to enter the country
(vi)
Entry of Indian corporate in retail industry: Several Indian corporate including Reliance, Bharti, Tata
amongst others have diversified into the retail segment
(vii)
Concept of specialized malls gaining popularity: The concept of specialized malls is gaining popularity
with auto malls, jewellery malls, furniture malls and electronics malls also anticipated to be part of the
sector in the future. Many developers are further setting up mixed-use projects offering hotels, amusement
facilities and commercial space.
The Hospitality Segment
The success of the hospitality industry highly depends on the economic growth of the country. Hotel industry
contributed 6.10% during 2008-09 to the country’s GDP. According to the Ministry of Tourism, there were
491,000 foreign tourist arrivals in January 2010 as compared to last year’s 422,000 indicating 16% growth. The
demand is such high that Indian hotel industry is adding over 90,000 rooms across the country in the next five
years. The hospitality industry is incredibly vast and providing ample amount of services to customers. The
growth for hotels is also likely to come from proliferation of Special Economic Zones. (Source: - Mott
MacDonald Report)
A structure of the Indian hospitality industry has given in Figure below:-
The hotel industry consists of five star, four star, three star, two star, one star, Heritage, Budget hotels, etc. In
resorts there are mainly clubs, four/five star resorts, beach resorts, heritage resorts, ecological resorts and many
more. In the restaurant sector there are cafes, foods and beverages etc.
The Indian hospitality industry is projected to grow at a rate of 8.8% between 2007 and 2016, placing India
as the second-fastest country in the sector of tourism in the world.
Friendly Government policies and massive investment in hotel infrastructure are the most important growth
drivers of the hospitality industry.
Biggest employment generator in the country.
India is ranked 11th in the Asia Pacific region and 62nd overall, moving up three places on the list of the
world's most attractive destinations, as per the Travel and Tourism Competitiveness Report 2009 by the
World Economic Forum.
It is ranked the 14th best tourist destination for its natural resources and 24th for its cultural resources, with
many World Heritage sites, both natural and cultural, rich fauna, and strong creative industries in the
country.
The India travel and tourism industry ranked 5th in the long-term (10-year) growth and is expected to be the
second largest employer in the world by 2019.
(Source: - Mott MacDonald Report)
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