Small cities may see retail surge

Smaller Indian cities are likely to see major retail real estate development by 2006 with the contribution of the cities to total organised retailing growing to 20-25 per cent, according to KSA Technopak and ICICI Property Services' report on the Indian retail real estate.

It is projected that the tier II cities, with population to the tune of 0.5 to 1 million will see real estate development linked to retailing to the tune of 100,000 sq ft by 2006.

Property developers are creating retail real estate infrastructure at an aggressive pace to cater to the increasing demand from retailers. The smaller cities are also coming into the growth ambit, Arvind Singhal, Chairman, KSA Technopak said.

At present, it is the metros which contribute nearly 85 per cent to the total organised retail but now cities like Surat, Lucknow, Dehradun, Vijaywada, Bhopal, Indore, Vadodara, Coimbatore, Nasik, Bhunaneshwar, Varanasi and Ludhiana will command a bigger pie with growth in the number of malls.

Cities like Lucknow will have three more malls by 2006 while Indore and Ahmedabad will add one each. Others like Cochin, Chandigarh, Ludhiana, Jaipur and Varanasi will add two malls each by 2006 taking up the total number of malls to 93 all over India, according to the study.

It is availability of cheaper real estate options coupled with brand acceptance in these cities are leading retailers to break even much faster in the smaller cities. "Average rental values for ground floor space ranges between Rs 50-60 per sq ft per month as opposed to Rs 100-120 per sq ft per month in some of the cities," the study said.

Retailers are introducing contemporary retail formats such as hypermarkets and supermarkets in these areas. However, the size is smaller. The average size of a retail mall ranging between 100,000-120,000 sq ft in comparison with the larger metros where a number of malls measure over 500,000 sq ft.

"There is also a marked increase in the disposable income of people in the smaller cities with some of the BPO companies moving out to these cities for search of manpower. The income curve has risen sharply making it attractive for retailers," a Chesterton Meghraj spokesperson said.

India is currently in the development phase marked by rapid pace of creation of retail infrastructure.

India's retail industry is currently Rs 930,000 crore and is expected to grow at 5 per cent per annum. Organised retail is Rs 28,000 crore strong will grow at the rate of 25-30 per cent annually. Its contribution to total retailing sales is likely to rise to 9 per cent by 2010.