cbre report - making delhi india's retail capital

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Report by CII and CBRE - Making delhi india's retail capital opportunities and challenges


  • Foreword An exhilarating and eventful tenure of two years has just passed for me as the head of the Delhi State Council of the Confederation of Indian Industry (CII). During these two years we organized a host of events that showcased the national capital and issues and policies that were relevant to it. This period also coincided when New Delhi crossed the important milestone of a 100 years of its existence. Therefore, this period had a special significance for the government, business and the citizens. In all our activities, we had the fullest support of the Chief Minister Mrs. Sheila Dikshit, Lt. Governor Mr. Tejendra Khanna and officials of other important government bodies. The city has now expanded to include what is broadly called the National Capital Region that has also the adjoining satellite cities of Gurgaon and Noida. In the post liberalization phase, specially in the last one decade, New Delhi has acquired greater importance as one of the emerging cities of the world and the second largest metropolis in India. Its traditional role and importance as the administrative and political capital of the nation has only been enhanced. In recent years, the city landscape has undergone far-reaching changes. Today, it has also emerged as one of the important business hubs in the country with unprecedented infrastructure developments. It was in this context that as we organize the Annual General Meeting 2013 we decided on the theme of Making Delhi, Indias Retail Capital. My colleague Mr. Pranay Sinha who is the Conference Chairman, CII Delhi State Council members and Secretariat have worked tirelessly to make this a success. I believe that this report prepared by our Knowledge Partner, CBRE, will give you rich insights into the opportunities and challenges of making Delhi the countrys retail capital. Virat Bhatia Chairman CII Delhi State Council
  • Preface Ever since one of the first malls came up in Delhi in 1999, the national capitals retail landscape has undergone a dramatic transformation. This change has been fuelled in recent years with a host of other developments: the growth of retail infrastructure, the coming in of big global brands to India, the evolution of the homegrown Indian brands and formats and policy changes over the years, and the recent policy allowing 100 per cent foreign equity into single brand retailing. Along the way, retail hubs have sprung up across all parts of the National Capital Region (NCR). The growth of tourism in North India has also propelled the retail market. There is an increasing surge in the fashion and luxury market with recent estimates suggesting that Delhi now constitutes for about half the luxury market in India. However, these developments and opportunities do not hide the myriad challenges of realising the full potential of Delhis retail market. Clearly, if the government and business are able to harness energies together, we can make Delhi, Indias Retail Capital. It was in this context that we chose the theme of this Conference; to deliberate on this vision and prepare a road map for the future. We have put together a series of sessions that I hope will throw up rich ideas and insights. As a backdrop to these deliberations, we invited one of the global real estate consulting firms in India, CBRE to partner with us to prepare this knowledge paper. I believe that this is an excellent resource that gives an understanding of Delhis retail canvas and draws on global case studies that give us indicators on how we may progress in our path to achieve the grand vision. We hope you find this document useful and have good deliberations during the Conference. Pranay Sinha Conference Chairman
  • Contents Foreword 1 Preface 2 Executive Summary 4 1 India Retail Market 6 Evolution of Retail in India Current Scenario 2 Retail and Delhi Economic Interlinks 10 3 Delhi Retail Landscape of the City 12 4 What Impedes Delhis Retail Revolution? 15 Real Estate Constraints Regulatory Constraints Industry Constraints Infrastructure and Urban Planning Constraints 5 Understanding Significance of Delhi as a Retail Market CBRE Survey Findings 21 6 Delhi and its Global Counterparts Key Learnings 27 7 Time to Tap Opportunities 31 8 Making Delhi Indias Retail Capital Key Recommendations 33 9 Conclusion 36 About CII 37 About CBRE 38
  • EXECUTIVE SUMMARY Executive Summary Delhi is Indias political and administrative capital, and is also the countrys second largest metropolis. The city has evolved over the years as a hub for commercial office, retail and institutional activity, housing important government offices and residential areas. While historically retail activity was limited to high street formats in Connaught Place, Khan Market and along Malcha Marg, however with both the wholesale and retail consumer markets strongly established in the high street format, there was a lack of organized mall structures compared to other Asian markets. With an increased exposure to global markets coupled with favorable policies, retail culture underwent a massive modification in the late 90s. This led to development of the Ansal Plaza, the first mall development in the city in 1999. The auctioning of retail plots in locations such as Shivaji Place, Saket and Vasant Kunj led to growth in the retail stock in Delhi, with the city currently having retail stock to the tune of almost 8.85 million sq ft and a slew of global retailers across the entire value chain - ranging from a Dunkin Donuts to a Burberry present in Delhi. Delhi Retail Peppered with Challenges While Delhi has evolved into one of the key retail destinations in the country, the city is still plagued by numerous issues across different verticals that are impeding the growth momentum that the city is capable of achieving. These issues stretch from real estate inefficiencies, infrastructure bottlenecks, regulatory impediments and industry constraints. Some of the key challenges are: High real estate costs Lack of quality real estate supply Legislative controls Lack of an industry regulator Lack of professional mall management Operational inefficiencies of mall developments Lack of skilled manpower Infrastructure bottlenecks and urban planning Absence of large scale redevelopment/renewal of retail built environment As the challenges spread across different domains, there is requirement of an integrated approach towards retail development in the city, with involvement of stakeholders such as the government, developers and the retail industry. What action these different sects can take to address these challenges has been discussed in detail in the report. And Opportunities While the report highlights the key challenges that the Delhi retail market poses, it also brings to light the fact that some of these challenges can actually also prove to be opportunities. For instance, a lagging infrastructure for retail provides foreign retailers an opportunity to invest in scaling up the cold chain of the country and reap benefits. Factors such as favorable demographics, growth in e-commerce, ease of credit availability and changes in legislations such as permitting foreign investment in multi brand and single brand retail are some of the key propellers of the India retail story which also have a strong bearing on Delhis retail infrastructure and retail built environment. 4 A CII AND CBRE REPORT
  • EXECUTIVE SUMMARY Delhi is a Key Destination for Retailers While the plethora of retailers waiting to enter the Delhi market is indication enough towards the significance of the city as a retail destination, however in order to quantify the significance of Delhi as a retail destination; CBRE undertook research on 317 key global brands across segments and geographies to understand how significant Delhi was in their scheme of operations. Delhi emerged as the city with the most number of luxury brands, the preferred city of entry by retailers and the city with the maximum number of global brands. The survey not only quantifies the significance of Delhi as a retail destination but also highlights the gap that needs to be bridged for a much larger retailer concentration in the city. Delhis retail economy can achieve much more if key impediments to its growth are addressed in a time bound manner. Drawing Comparisons Global Counterparts The development of organized retail in Delhi has been a market led phenomenon, with very little planned, proactive initiatives being undertaken by the development authorities. Retail development in the city has largely been scattered with numerous small shopping zones mushrooming all across the city. On the other hand, most of Indias global counterparts have adopted an integrated, planned approach towards developing large shopping districts. Three leading retail destinations - Singapore, London and Shanghai were studied to analyze how retail development in the cities was undertaken. Waterfront developments in all three cities Marina Bay in Singapore, Canary Wharf in London and Pudong area in Shangai are mixed use developments that have assisted in uplifting the image of the respective city as a whole and have fuelled investments into the city and country. These were planned business districts that have a substantial retail component not to support the commercial district but as an independent retail destination to attract tourists from within and outside the country. For instance, while Marina Bay remains a financial district, however gove

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