The presentation answers why INFRASTRUCTURE is an important issue in the organized retail industry, what are the underlying problems in this regard and what can/must be done to improve it.

1. INFRASTRUCTURAL ISSUES
REGARDING ORGANIZED RETAIL
IN INDIA
-SOUMYA CHAKRABARTI(109)
-SATYAM GAMBHIR(096)

2. Growth of Indian Retail
• 590mn$ by 2011-12.
• Over I trn $ by 2016-17.
• 16 % by 2011-12
Source: Technopak analysis

3. Key issues in Indian retail market
* KPMG Consumer Markets Survey

4. Key issues in Indian retail market
Source: Retail in India, Getting organized to drive growth, CII-A.T.Kearney Report, 2006

5. Criticality of issues
Source: Retail in India, Getting organized to drive growth, CII-A.T.Kearney Report, 2006

6. INFRASTRUCTURE ISSUES
• Real estate
• Transport
• Supply chain issues
- Cold chain infrastructure

7. REAL ESTATE REQUIREMENTS
• Property rates: Rs 8-10 crore per location.
• Planned investment- US$ 35 bn over next 5-7 years
• 93% investment for the urban market.
• Retail space required: 487 mn sq ft
• 50% - shopping malls
• 50% - formats like supermarkets.
• Planned - 143 mn sq ft of mall space
• Still …… a shortage of more than 40% in mall space.
• Required retail space is around 7-8 times current space
Source: RETAIL IN INDIA – Mathew Joseph, Nirupama Soundararajan, ICRIER, 2009

8. FACTORS IMPEDING ORGANISED
RETAIL REAL ESTATE DEVELOPMENT
• Outdated Rent Control Act
CASE: Mr. R.K.Gupta, Landlord, Connaught
Place
Source: Outdated Rent Control Act is stifling our cities, Times Of India,
June 12, 2010
• Lack of clear ownership titles

9. FACTORS IMPEDING ORGANISED
RETAIL REAL ESTATE DEVELOPMENT
• Land Ceiling Act hindering growth
• High stamp duty
- 12.5% in Gujarat & 8% in Delhi
- Cost upto 6-10% of sales.
• Zoning restrictions
Source: 1) SMALL VS MALL, Prof. H.Venkateshwarlu, Dr.C.V.Ranjani, Indian Jornal Of Marketing,
October,2007
2) Managing Retailing – P.K.Sinha, D.P.Uniyal,2008

10. FACTORS IMPEDING ORGANISED
RETAIL REAL ESTATE DEVELOPMENT
• Lack of proper city planning
- Delhi master plan provides only 16% commercial space.
Source: Retail in India, Getting organized to drive growth, CII-A.T.Kearney Report, 2006

11. FACTORS IMPEDING ORGANISED
RETAIL REAL ESTATE DEVELOPMENT
• Absence of a centralised title registry
providing title gurantee
• Lack of uniformity in local laws & their
application
• Non-availability of bank financing
• High interest rates & transfer taxes
• Lack of transparency in transaction values
• Very few takers of quality space
Source: RETAIL IN INDIA – Mathew Joseph, Nirupama Soundararajan, ICRIER, 2009

12. SOLUTION TO REAL ESTATE
DEVELOPMENT PROBLEMS
• Public private partnership (PPP)

13. RISING RENTALS
• Rent to revenue ratio
- 4% for a hypermarket
- 10% for a department store
- 20% for niche retailers.
• Department store needs to make Rs2000/sq ft
per month just to break-even
Source: ORGANISED RETAILING IN INDIA: ISSUES & CHALLENGES, Prof. Sudhanshu Shekhar
Kar, Dr.Sarat Kumar Sahoo,Indian Journal Of Marketing, November 2009.

14. RENTALS EATING INTO PROFIT
MARGINS
Source: Jones Lang Lasalle Meghraj Report on India Retail 2008, KPMG Analysis

15. WHY RENTALS HAVE BEEN
INCREASING ?
• Demand outstripping supply
• Pro- tenant Rent Control Act

16. SOLUTION TO EXHORBITANT RENTALS
(REVENUE SHARING MODEL)
• RETAILERS • LANDLORDS
• To reduce high • Huge stock of unsold
operating costs inventory of retail
• Wants security if sales space
are low • 145 million sq ft of
• Fuel expansion plans commercial space in
• Fixed % of profits is metros has no takers
paid
Source: Business Today, 11 September, 2010

17. CLEARANCES REQUIRED
And many more…..

18. Solution to multiple clearance
• Single window system at the local government
level

19. WHY INFRASTRUCTURE FOR
RETAIL STORES IS AN
IMPORTANT ISSUE ?

20. With every 25 km
&
With every 10 rupees.
Consumers are known to shift loyalties
Source: ORGANISED RETAILING IN INDIA: ISSUES & CHALLENGES, Prof. Sudhanshu Shekhar Kar, Dr.Sarat
Kumar Sahoo,Indian Journal Of Marketing, November 2009.

21. THANK YOU !!!