CBRE Report - Making delhi india's retail capital

MAKING DELHI INDIA’S RETAIL CAPITAL –
OPPORTUNITIES AND CHALLENGES

A CII and CBRE Report

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, India’s 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 country’s 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 capital’s 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 Delhi’s retail
market. Clearly, if the government and business are able to harness energies together, we can
make Delhi, India’s 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 Delhi’s 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 Delhi’s 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 India’s Retail Capital – Key Recommendations

33

9 Conclusion

36

About CII

37

About CBRE

38

EXECUTIVE SUMMARY

Executive Summary
Delhi is India’s political and administrative capital, and is also the country’s 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 Delhi’s 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. Delhi’s 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 India’s 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 government initiatives to create
recreational facilities in and around it have made it the top destination for tourists visiting the country.
New business districts in India can replicate these models – business districts need not be “ghost
towns” with only commercial operations but can serve the dual purpose of being financial hubs and
entertainment zones with retail and recreational facilities.

Key Action Points
The study of the retail market in Delhi indicates that while the city faces a number of challenges,
these challenges can be overcome by syndicated efforts from all stakeholders i.e. the government,
developers and the industry itself. Developers need to focus on planning malls efficiently and
engaging in professional mall management to ensure that inefficiencies in operations does not lead
to a failed retail mall – leading to wastage of retail space in an already supply constrained scenario.
The industry at its end needs to invest in skilled personnel and supply chain infrastructure – both
critical for the efficient functioning of the industry. The government on the other hand can act as
the key enabler by making amends to legislations such as the Rent Control Act, APMC etc., while
appointing a regulator for the industry to oversee and streamline the approval process. In case all
recommendations are duly considered, the contribution that retail makes to the city’s economy can
be greatly altered and Delhi can further consolidate its position as The Retail Capital of India.

MAKING DELHI INDIA’S RETAIL CAPITAL – OPPORTUNITIES AND CHALLENGES

5

1 INDIA RETAIL MARKET

1

India Retail Market

1.1. Evolution of Retail in India
Prior to the 1990s, the Indian retail market was largely unorganized and characterized by small
family-run neighborhood retailers, otherwise known as Kirana or Mom & Pop stores. Organized
retail was virtually non-existent aside from larger domestic fashion and footwear chains such as
Raymond’s, Nalli’s and international footwear brand Bata. Following the economic reforms of 1991
a wave of liberalization and privatization gradually ushered in a new era of modern organized retail
paving the way for the emergence of newer domestic fashion and apparel stores including Shopper’s
Stop and Pantaloons. During this period the government also began to lure overseas investment in
the sector by permitting 100% FDI in the cash and carry / wholesale segment in 1997.
The pace of development gathered pace in the late 1990s as shopping malls began to spring up
across the country and hypermarkets made their debut. Crossroads, the first major shopping mall in
the country, opened in Mumbai in 1999 quickly followed by Ansal Plaza in New Delhi. These new
retail formats were embraced by India’s rapidly emerging middle and upper classes as they provided
shoppers with a good ambience, clean and convenient layout, multiple dining options, recreational
facilities and a single point of purchase for a wide variety of goods.
The positive response to India’s first shopping malls resulted in the construction of similar developments
in the early to mid-2000s including the Forum Mall (Bangalore, 2004), Infinity mall (Mumbai, 2004)
and Select City Walk (New Delhi, 2007). Starting from a handful of shopping malls in the year 2000
India now has more than 220 organized retail developments in leading cities across the country
including New Delhi, Mumbai, Bangalore and Chennai.

Organized retail
was virtually nonexistent aside from
larger domestic
fashion and
footwear chains
6


Organized retail
was virtually
non-existent
aside from larger
domestic fashion
and footwear
chains such as
Raymond’s, Nalli’s
and international
footwear brand Bata


Timeline of Retail Development in India

SHOPPING IS AN “EXPERIENCE”

• Liberalisation of economy
• 51% FDI in Cash and Carry in 1997
• New retail formats emerge
• Crossroads in Mumbai, Ansal Plaza in Delhi
– first mall to get operational in 1999

• Large number of operational malls – developers adopt
differentiation to position their properties and stores
• Some of India’s most successful malls commence operations
– Ambience Mall (2007), Select City Walk (2008) and DLF
Promenade (2009)
• India’s first luxury mall ‘DLF Emporio’ becomes operational
in Delhi in 2010

Brands operational: Shoppers Stop, Benetton,
Pantaloons Revlon, L’oreal, Marks and Spencers

Brands operational: Promod, Mango, Debenhams, Charles
and Keith, DKNY, FCUK, Inglot, Zara

PERIOD OF INITIATION

EARLY 80’S
AND 90’S

1991-2000

2001-2005

2005-2010

2011
ONWARDS

LIMITED ACTIVITY

GAINING TRACTION

WHAT’S NEXT?

• Shopping at
neighbourhood markets,
shopping for readymade
apparel not a norm
• Manufacturers such as
Raymond’s, Bata, operate
through exclusive outlets of
franchisees

• Period of heightened activity, malls mushroom
across the country, increased footfall due to
novelty value
• Doubts over ‘malls are only for window
shopping’ cleared, shoppers appreciate the
concept of ‘ambience, recreation and shopping
under one roof’
• 2001–2003: DT Mall, MGF Mall, Sahara Mall
(Gurgaon)
• 2004: Forum Mall (Bangalore), Inorbit Mall
(Mumbai)

• 100% FDI permitted in
single brand retail, 51%
FDI in multi brand retail
• Brands such as GAP IKEA,
,
Topshop and Abercrombie
and Fitch are some of the
key brands waiting to tap
the Indian retail market

Brands operational: Bata,
Raymond’s, Vimals

Source: CBRE Research

Brands operational: Tommy Hilfiger, Nine West,
Fossil, Aldo, MAC

1.2. The Current Scenario
In the run-up to the global financial crisis of 2008, around 300 new shopping centers were scheduled
to be completed. However, this pipeline was decimated by the credit crunch, leading to a shortage
of modern retail stock. In 2011 the development pipeline sprung back to life as construction work
resumed on a number of projects. The year 2012 saw around 2 million sq. ft. of new retail space
getting completed with about 12 million sq. ft. of new supply scheduled to come on stream in the
next 8-10 months, the bulk of which is space in shopping malls. Further new retails schemes are
scheduled for delivery in 2014 and 2015. The supply of modern retail space across the country’s
seven largest cities currently stands at about 52 million sq. ft. Around 70% of this space is in Delhi NCR, Mumbai and Bangalore.
Transaction activity and size are expected to increase on the back of increase in consumer spending
and expanding mid-income purchasing power. Despite the scarcity of quality supply, most retail
chains continue to launch their first Indian store in Delhi and Mumbai – usually in a street shop before expanding elsewhere.New supply is steadily coming on stream in the National Capital Region
(NCR) and will provide opportunities for retailers to operate in an organized retail environment. High
street formats continued to dominate the retail landscape whilst most luxury retailers preferred to
operate from five star hotels and premium malls.

7


New Retail Supply – Pan India 2007-2013
16

15

14

12

12
10

10

7.7

8
6

5
3.6

4

2.7

2
0

2007

2008

2009

2010

2011

2012

2013


In terms of completed retail stock, Delhi has close to 8.95 million sq ft of completed retail space.
Delhi accounts for almost 17% of the total organized retail space in the country, with a significant
proportion of supply in the pipeline as well.

Supply Comparison of Top Seven Cities

Pune
12%

14

9

Chennai
8%

9

6

5
3

3

Hyderabad

Chennai

Bangalore

Bangalore
20%
Mumbai

0

3
Mumbai
33%

Pune

9

Delhi
21%

Hyderabad
6%

12

Delhi

Retail Space (million sq ft)

16

Organized Retail Stock Distribution


Rents for prime retail space have recovered steadily after suffering a dip in 2008-2009 as supply
has not kept up with demand. Although high streets such as Khan Market, Connaught Place in
New Delhi, Linking Road in Mumbai and Brigade Road in Bangalore continue to command a
premium due to their favorable locations, most international retailers desire larger floor plates,
back-up power systems and a modern retail environment. As a result, there has been an increase in
demand for space in shopping malls. While drawing a rental comparison, high streets in Delhi still
fetch a considerable premium when compared to high streets across other cities. Khan Market, the
upmarket destination for diplomats and expatriates is the most expensive high street location in the
country. Comparing rentals across prime mall developments, average rentals in Mumbai were higher
than that in Delhi; however premium mall developments such as The Emporio continue to quote
rentals in the range of INR 750-800 /sq ft/month.
8



High Street Rentals Across Key Cities

Rentals Across Prime Mall Developments

Jubilee Hills,
Hyderabad

135

hyderabad

T nagar,
Chennai

150

Chennai

Park street,
Kolkata

Linking Road,
Mumbai
Khan Market,
Delhi

1150
400

600

INR/sq ft/month

800

287

Mumbai

800

200

180

Bangalore

315

0

160

Kolkata

330

Brigade Road,
Bangalore

65

1000 1200

350

Delhi

510
0

100

200

300

400

500

600

INR/sq ft/month


Despite a high rental spectrum, major cities in India including Delhi continue to witness gradual
expansion by international luxury goods, apparel and F&B retailers. Recent quarters have also seen
a number of well-established international mass market brands enter tier II locations, partly due to
the lack of space options in tier I markets. Additional new entrants are likely in the coming months.
International food and beverage outlets have continued to expand in 2012, both at the fast food and
fine dining end of the market. Luxury retailers remain focused on Delhi and Mumbai but continue
to refine their strategy and product offering for the Indian market, which in selected cases has seen
them consolidate and reduce the size of some stores. Fashion remains a high growth sector and
major apparel brands from the United States and Europe continue to seek opportunities to enter or
expand in major markets across the country, including some tier II locations.

Luxury retailers
remain focused
on Delhi and
Mumbai but
continue to refine
their strategy and
product offering
for the Indian
market

9

2 RETAIL AND DELHI – ECONOMIC INTERLINKS

2

Retail and Delhi –
Economic Interlinks

Delhi is the biggest commercial and administrative hub of North India. The city has witnessed a
huge quantum of office space supply, as well as substantial supply of retail stock of the country.
The Delhi region is characterized by high work force participation ratio (‘WFPR’) of 32.84% as per
Census of India, 2001. The increase in WFPR is a result of migration of people from neighboring
states. With about 42.5% 1 of the population lying in the Socio Economic Classification (‘SEC’) of
A and B in Delhi, both the income and expenditure propensities are at an all-time high indicating a
higher paying capacity of the city residents as compared to average Indian cities. The city’s booming
economy is also the main reason as to why so many people migrated to Delhi in recent years in
search of better living conditions and employment. The retail sector in Delhi-NCR is dominated by
unorganized retail, while the organized segment is concentrated in numerous retail malls and high
street destinations across the region.
The last decade has observed an increase in the growth trajectory of Delhi with increasing purchasing
power and consumption levels. While Delhi contributes to only 1.4% of the National population, it
contributes about 3.8% to the National GDP The services sector has emerged as the growth engine
.
for the city, with services accounting for almost 82% of the total GDP of Delhi. The retail sector has
acted as an active contributor to the GDP as the restaurants segment (sub set of services) particularly
has seen considerable growth, registering a growth rate of almost 20% in 2011-12 when compared
to 2010-11. The concept of food courts, fine dining and cafes has gained significant prominence
over the past decade, thereby fuelling the growth of the services sector in the city.

1 Indicus Market Skyline of India, 2006

Delhi GDP Break Up by Sector
Manufacturing
17%

GDP Growth Rate

Agriculture
1%

250000

15

12

150000

100000
9

Growth Rate (%)

INR Crores

200000

Source: MOSPI
10


Delhi GSDP
(INR Crores)

Delhi GDPGrowth Rate

Source: Chapter 3 Demographic Profile

2011-12(A)

2010-11(Q)

2008-09

2007-08

2009-10(P)

The growth in Net State domestic product
(NSDP) of Delhi has been 11.3% in
2011-12 as compared to 2011-11

2006-07

0
Services
82%

2005-06

50000

6

India GDPGrowth Rate

While Delhi
contributes to
only 1.4% of
the National
population, it
contributes about
3.8% to the
National GDP

2 RETAIL AND DELHI – ECONOMIC INTERLINKS

The below chart provides an insight into the per capita income and expenditure of different zones in
Delhi. As can be observed below, the catchment of South Delhi has the maximum per capita income
and expenditure thereby fuelling growth of nearby high streets and malls. The difference between the
per capita income and expenditure of South Delhi and Central Delhi is the widest, with South Delhi
having more than twice the income and expenditure levels. This impacts the retail profile of both
zones considerably in terms of retailer mix, rental values and capital values.
Per Capita Income and Expenditure in Delhi Zones
INR
192,623

200,000
158,616
143,782

150,000
114,344
100,000

83,699

111,786

134,339
102,408

82,434
62,804

50,000

0

East

Central
Per Capita Income

North

West

South

Per Capita Expenditure

• Central: Sadar Bazaar, Paharganj, Sitaram Bazaar
• East: Geeta Colony, Krishna Nagar, Shahdara
• North: Pitampura, Ashok Vihar, Shastri Nagar
• West: Patel Nagar, Nariana, Rajouri Garden
• South: Greater Kailash, Haus Khas, Gulmohar Park
Source: Indicus, CBRE Research

As can be observed below, factors such as disposable income, consumer profile and urban population
have a direct bearing on the retailer activity in the region. New Delhi, which has a high per capita
income and urban population, has a higher presence of retailers when compared to cities such as
Kolkata, Pune or Hyderabad all of which have a significantly lower per capita income.
Presence of Retailers Vis-a-Vis Income and Population
Per Capita
Income (INR)
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0

0%

10%
New Delhi

20%

30%

Mumbai

Hyderabad

40%

50%
Pune

60%
Kolkata

70%

80%

90%

Noida

Note: The size of the bubble represents (in %) the share of retailers present in India for the particular city


11

3 DELHI – RETAIL LANDSCAPE OF THE CITY

3

Delhi: Retail Landscape of the City

Delhi is India’s political and administrative capital, and is also the country’s second largest
metropolis. The city holds offices of the Central and state governments and has also been an
important center for trade and commerce. A high economic growth rate, rapid urbanization
and huge influx of migrants from all parts of the country, has led to an expansion in the city’s
urban limits.
The CBD of Delhi evolved over the years as a hub for commercial office, retail and institutional
activity, housing important government offices and residential quarters. Retail activity was limited to
high street formats in Connaught Place, Khan Market and along Malcha Marg. Due to restriction
on redevelopment in Lutyens Delhi; traditional retail formats are still prevalent in the region (absence
of investment grade developments). Traditional residential activity hubs emerged in proximity to the
CBD of Delhi which was supported by unorganized retail developments predominantly comprising of
shops on lower floors and residences on higher floors. These locations were characterized by dense
development activity, increasing congestion and infrastructure inadequacies which led to ‘outward’
organic growth in all directions. This resulted in support retail activity emerging across various new
residential hubs.
Delhi – Organized Retail

NETAJI SUBHASH PLACE DISTRICT
CENTRE: Characterized by high density
residential & industrial developments
Malls: Pearls Omaxe Mall, North Square Mall,
D Mall
Major Brands: Haldiram, Nirulas, Kalpana, etc

NH-1

ROHINI AND PITAMPURA:
Predominantly housing midhigh income populace including
entrepreneurs, traders
Malls: Metro Walk Mall, M2K Mall,
D Mall
Major Brands: Pantaloons,
Reebok, Nike, etc

NORTH DELHI

NORTH EAST
DELHI

NH-10

DISTRICT CENTRE AT SHIVAJI
PLACE, RAJOURI GARDEN,
SUBHASH NAGAR: Primarily
unorganized / plotted residential
developments housing middle to
high income populace
Malls: City Square Mall, TDI Mall,
West Gate Mall, Pacific Mall
Major Brands: Zara, Jack and
Jones, Vero Moda , Promod,
Alcott, CK Jeans etc

Map not to scale, for representation purpose only
12


Traditional
residential activity
hubs emerged in
proximity to the
CBD of Delhi which
was supported by
unorganized retail
developments
predominantly
comprising of shops
on lower floors
and residences on
higher floors

NORTH WEST
DELHI

CENTRAL
DELHI

EAST
DELHI

SOUTH WEST
DELHI

NH-24

SHAHADRA: ‘Spillover’
high density residential
developments housing
middle income populace
Malls: Cross River Mall
Major Brands: Pantaloons,
Haldiram, Fun Cinemas, etc

SOUTH
DELHI

NH-8
NH-2

DISTRICT CENTRE AT VASANT KUNJ: Relatively
superior development activity housing mid-high
income populace
Malls: DLF Promenade, DLF Emporio, Ambience Mall
Brands Present: Louis Vuitton, Cartier, Zara, The
Collectives, Thomas Pink, Brook Brothers etc

DISTRICT CENTRE AT SAKET:
Predominantly high-end residential
catchments ~ High income populace
Malls: Select City Walk, DLF Place,
MGF Metropolitan Mall
Major Brands: Zara,, FCUK, Aldo,
Charles & Keith, Ed Hardy, Esprit,
Lancôme, etc


Delhi – High Streets
NH-1

KAROL BAGH: A popular destination for
inhabitants of North Delhi, catchment with
relatively high disposable income
Major Brands: McDonalds, Subway, KFC,
Woodlands, Levi’s, Spykar Jeans, Raymonds, etc

RAJOURI GARDEN: Preferred shopping
destination for the residents of West Delhi,
despite the emergence of mall culture
Major Brands: Golden Dragon, Moti
Mahal, Subway, Aqua Lounge, Domino’s,
Slice of Italy, etc

CONNAUGHT PLACE : Due to its
central location the catchment is vast,
with most retailers entering India vying
for space on the high street
Major Brands: Starbucks, Tissot, Tag
Heuer, Costa Coffee, McDonald’s etc

NORTH DELHI

NORTH EAST
DELHI

NH-10
NORTH WEST
DELHI

CENTRAL
DELHI

EAST
DELHI

SOUTH WEST
DELHI

BASANT LOK: The market has faced stiff
competition from high-end malls, and is
less frequented by South Delhi inhabitants
Major Brands: Gloria Jean’s Coffees, Le
Marche Sugar And Spice, Barista etc

NH-8

SOUTH
DELHI

NH-2

M BLOCK GREATER KAILASH: Attracts shoppers from
all parts of Delhi , particularly from South Delhi
Major Brands: Espirit, Benetton, Coffee Bean and Tea,
Pizza Hut, KFC etc

NH-24

KHAN MARKET, PANDARA
ROAD: A major lifestyle
destination. Khan Market has
been voted among the leading
high streets in the world
Major Brands: Hidesign,
Benetton Tommy Hilfiger,
L’occitane , Subway, etc

SOUTH EXTENSION: Evolved as a high street in
Delhi with various brands’ flagship stores
Major Brands: Lacoste, Tommy Hilfiger, USPA,
Nautica, Sony, Nokia etc

Map not to scale, for representation purpose only

Delhi has been growing at a rapid pace because of increasing migration. The unprecedented growth
of population especially in the 1980s and beyond and the consequent development imposed severe
pressure on the infrastructure of the city. Following large scale events such as The Asian Games
(1982) in the city, it was suggested through various planning exercises that serious consideration
should be given for a planned decentralization of the city. Therefore, the authorities undertook
several infrastructure and development initiatives primarily in the southern quadrant of the capital,
which was often perceived as an extension of Lutyen’s Delhi owing to its proximity to the city center.
All these factors led to the extension of the city areas towards the southern direction. Development
of new residential colonies, influx of infrastructure growth and proximity to prominent work centers
helped South Delhi emerge central to city’s retail economy. Over the past two decades we have
witnessed the retail economy expanding its footprint across all leading zones in the city, particularly
the West and the North West.
Retail Supply Trend in Delhi Over the Years
Thousands
1800

12
10

1200

8
6

600

4
2

0

0
2007

2008

2009

2010

2011

2012

2013

Retail Supply
Number of Malls

MAKING DELHI INDIA’S RETAIL CAPITAL – ISSUES AND OPPORTUNITIES

13


With both the wholesale and retail consumer markets strongly established in the high street format,
there was a lack of organized mall structures gaining strong foothold compared to other Asian
markets. However, with an increased exposure to global markets, 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. Retail destinations in Delhi have today evolved into centers of
entertainment than mere shopping destinations. The city is home to some of the most sought after
shopping destinations in the country, which are peppered all across the city in South, West and
East Delhi. With improved connectivity coupled with increasing number of flyovers and bypasses,
key retail catchments are now attracting consumers from distant locations. A new trend witnessed
has been the integration of retail zones into large mixed use developments. Projects such as
Select City Walk and DLF Courtyard in Saket are formats that have dedicated hospitality spaces
alongside the mall. On the other hand, Unitech Group’s Metro Walk in Rohini has an integrated
amusement park.
The Delhi mall market was slow to start as far as the stock of retail mall space was concerned as it
was overtaken by Gurgaon and Noida in terms of development of mall space by 2003-2004. The
auctioning of retail plots in locations such as Shivaji Place, Saket and Vasant Kunj led to growth in the
retail stock in Delhi. The drive by the Municipal Corporation of Delhi (MCD) to clear commercial and
retail activities from illegal high streets also led to a surge in demand for mall space from retailers. As
a result, Delhi city, followed by Gurgaon and Noida has emerged as a pioneer in retail mall space
evolution in the region.

The city is home
to some of the
most sought
after shopping
destinations in the
country, which are
peppered all across
the city in South,
West and East Delhi
14


4 WHAT IMPEDES DELHI’S RETAIL REVOLUTION?

4

What Impedes Delhi’s Retail
Evolution?

While Delhi has evolved into one of the key retail destinations in the country, the city still has a
number of issues that are affecting the growth momentum. The issues are classified in four key
categories i.e. real estate constraints, regulatory constraints, industry constraints and infrastructure
constraints. All of these are discussed in detail below.

4.1. Real Estate Constraints
Lack of Quality Supply
The Delhi
Development
Authority has
identified about
5% of the city’s
developable land
to be allocated for
retail development

The total organized retail mall space in Delhi city stands at close to 9 million sq ft, concentrated in
about 50 shopping malls; almost 53% of the entire organized retail space in the National Capital
Region (inclusive of Gurgaon and Noida). However, the quality of retail space in the city lags behind
that in satellite towns of Gurgaon and Noida, with barely 41% of the overall retail space being
concentrated in Grade A mall developments, compared to 70% and above for both Gurgaon and
Noida. The quality supply deficit has led to an uneven retail development across different zones in
the city, with most retailers preferring to occupy a couple of malls that already have high footfalls
and are located in suitable target catchments. As can be observed from the graph below, majority
of this quality supply (33%) is located in South Delhi, which houses majority of the Grade A malls in
the city. This is one of the reasons why out of more than 50 malls located in the city, only a handful
can be described as successful retail destinations. These include properties such as Select City Walk
in Saket, DLF Promenade in Vasant Kunj and Pacific Mall in Subhash Nagar.
The Delhi Development Authority has identified about 5% of the city’s developable land to be
allocated for retail development. Foreign retail giants, particularly hypermarkets prefer to be located
in malls with lager floor plates, which is scarce in the city. For a city with the population in excess of
10 million and geographical spread as that of Delhi, it is extremely important to increase the share
of retail in the overall land use and built environment of the city.


15


Completed Retail Supply in NCR
Million sq ft
10
8.95

76%

70%

Zone Wise Break up of Completed
Supply in Delhi

Vacancy
%
80

West Delhi
24%

East Delhi
20%

70
8

60
6.16

6

50

41%

40
4

30
1.72

2

20

North Delhi
23%

10
0

Delhi

Gurgaon

Noida

South Delhi
33%

0

Total Supply
Grade A malls as a % of total supply
*Grade A malls
Source: CBRE Research as a % of total supply

High Real Estate Costs
Delhi comprises of some of the costliest retail zones such as Khan Market, which is a direct
consequence of the rather uneven infrastructure development and inadequate quality retail supply
in the city. While drawing a comparison between average retail rentals in Delhi and its suburbs, it
emerged that retail developments in Delhi command a significant premium when compared to the
suburbs. Average mall rentals in the Saket District Centre, which houses the popular Select City Walk
and DLF Place are almost double than that of mall developments in Noida. High street locations
such as Khan Market, Connaught Place, South Extension fetch considerably higher values when
compared to the suburban high streets in Gurgaon and Noida. Such an expensive asset pricing
usually exerts pressures on prominent retail brands to look for alternate districts in the city and also
look for expansion in other parts of the country. The mismatch between supply availability and asset
pricing leads to inflated real estate costs for tenants, which tends to deflate the attractiveness of Delhi
as a retail destination.
Current Rental Values in Delhi and its Suburbs
INR/
sq ft/month
350

Key High Street Rentals

INR/
sq ft/month
350

1200

1150

1000
300

800
275
250

400
225

200

250

175


Galleria Market

Basant Lok

South Extension

Khan Market

Noida

Connuaght Place


Gurgaon

Vasant Kunj

0
Saket District
Centre

200

16

550

Sector 18 Market

250

650

650

600


4.2. Regulatory Constraints
Legislation Issues
One of the biggest hurdles any retailer faces in India is the multiplicity of laws governing the sourcing,
movement and sale of goods, especially agricultural produce. There is no mention of fund allocations
for retail in the Delhi budget. Although various skill development schemes are highlighted in the city’s
budget, however none pertain specifically for the development of the retail sector. Foreign direct
investment is definitely not the only step needed towards creation of strong retail structure in the
country. There is also a need to relook at some of the legislations that govern retail in Delhi.

APMC Act

• The Act has not been amended in Delhi and places numerous
restrictions on farmers to sell their produce to retailers directly. The act
gives monopoly to the Agricultural Produce Marketing Committee,
(which typically is cartelized) thereby burdening the farmers with lower
prices for their produce.
• Other states such as Andhra Pradesh, Punjab and Maharashtra have
witnessed an amendment in the act thereby allowing for competitive
wholesale markets. For instance, Andhra Pradesh has initiated a
“Raythu Market” (farmers market) where farmers sell directly to
consumers at select locations.
• On a positive note, initiatives such as a Model Draft to amend the
APMC is already in place which will try to facilitate a direct relationship
between retailers and farmers. The draft also provides for steps
such as modernisation of the mandi and pushing for construction
of peripheral roads a so that the farmers from surrounding areas of
Delhi are able to reach the city easily.

Rent Control Act,
1958

• The Rent Control Act in Delhi, which dates back to 1958, is biased
in favour of tenants thereby allowing some tenants to hold onto shops
for decades as there is no clear grievance redressal mechanism for
landlords.
• The Act has a provision for increasing rent by 10% once in three years,
which is a very unrealistic provision considering the current inflationary
trends in the country.
• There is a Delhi Rent Control Act, 1995 which tries to strike a balance
between the interests of tenants and landlords but awaits notification.

Urban Land Ceiling
& Regulation Act

• The Act was passed in 1976 and places a limit on the land available
for development which meant that land was available but at a steep
premium. When the land owners sold their land to construction
companies, they charged abnormally high prices.
• The Central Government repealed this act in 1999 and a number
of other states such as Punjab, Gujarat Haryana and more recently
Maharashtra followed suit; however Delhi continues to follow the act;
thereby resulting in high land values.


17


Absence of a Regulatory Body
Unlike many other industry sectors in India, retail does not have a regulatory authority. In fact, the
retail industry or for that matter the real estate sector has not been granted an industry status, thereby
impacting numerous factors such as investment inflows, credit availability and incentives for the
sector. In Delhi for instance, a retail store requires close to 30 licenses to initiate operations, which
cause considerable delay and also builds upon the retailer costs. There is no nodal agency/state
level agency that provides single window approvals/licenses specifically for retail. There is need for
a regulator to oversee the functioning of the modern retail outfits and the constraints faced by them
in their dealings for procurement of supplies, taxation structure faced, infrastructure inadequacies,
etc. A proper licensing policy needs to be designed and licenses maybe granted on the basis of the
category of retail outlet and based on population under a single municipality. Even in China, the
retail operations are governed at a state level however the country follows a single window clearance
policy to minimize the retailer effort on paperwork.

4.3. Industry Constraints
Absence of Professional Mall Management
The existing shortage of Grade A supply and an uneven concentration of the organized retail
footprint in the city have led to low vacancy levels in the most prominent malls in the city. Majority of
these developments are located in South Delhi and West Delhi districts, which also boast of affluent
catchment base with brand consciousness, developed transport corridors and well managed retail
centers. These developments do not concentrate only on rentals, but pay significant attention to
factors such as location, architecture, anchor tenants, efficient shopping mix, a good food court,
amongst other factors. Professional mall management entails providing quality services to customers,
imbibing customer behavior with sales and facilities management. It is important to consider the
entire shopping center as a single entity and work upon improving the footfalls and revenue streams
for all zones and locations within the mall. An efficient mall management would mean regular
understanding of shopping behavior, analysis of the variation of footfalls and revenues across the
property, initiatives to attract business and improve the image and marketability of the property. Most
retail developers in Delhi are still in the midst of the learning curve with respect to ensuring success
in undertaking shopping center development. Many fail to realize that successful shopping mall
management requires strong skills to bring retailers of different kinds together within an organized
environment and create synergy between them.
Saleable Area and Vacancy Levels of Leading Malls in Delhi

10

400000

8

300000

6

200000

4

100000

2

0

Ambience Select City
DLF
Mall, VK
Walk Promenade
Saleable Area

18


Pacific
Mall

Vacancy Levels

DLF
Place

DLF
MGF
City
Emporio Metropolitan Square

TDI
Mall

0

Vacancy level %

12

500000
Saleable Area

600000

It is important
to consider the
entire shopping
center as a single
entity and work
upon improving
the footfalls and
revenue streams
for all zones and
locations within
the mall


Operational Inefficiencies
Delhi already faces a supply constraint and limited scope for additional supply coming on stream
due to land constraints. Compounding the problem is the fact that a large number of developers’
strata sell their shopping centres thereby resulting in an inefficient shopping mall on account of lack
of control on tenant mix and trade mix. More than 3 million sq ft of retail space in Delhi is strata-sold,
thereby impacting the tenant profile and success of the shopping mall as a whole.
Developers who strata-title their shopping centers in order to achieve short term capital gains,
inevitably do so at the cost of sacrificing the long-term successful management of their malls. A
case in point can be the malls of Vasant Kunj and Saket, all of which (expect the Metropolitan Mall
in Saket) operate on a 100% lease model and are considered to be amongst the best performing
malls in the country. It is extremely important to follow a ‘lease only’ model in a retail center as this
helps developers control tenant positioning and manage common areas more effectively. The desire
to sell a portion of the mall on a strata title basis means the builder does not maintain the facilities
property and enables investors to resell their shops, which ends up ruining the tenant mix. As can be
seen below, most Grade A (superior grade) malls operate on a higher percentage of lease, while the
lesser successful inferior grade malls have a high percentage of sale.
Lease and Sale Percentage of Malls in Delhi

Grade Wise Sale and Lease
Percentage of Delhi Malls
%
100

Sale
34%

34%

80
59%
60

78%

40

Lease
64%

66%

20

41%
22%

0

Grade A
Sale %

Grade B

Grade C

Lease %

Grade A signifies the most superior malls with larger floor plates, 100% power back up facilities, superior quality infrastructure
and car parking

Lack of Skilled Manpower
Around 40%
of the people
hired for luxury
retail in India are
from front end
hospitality, but
most of this is a
compromis

The lack of skilled personnel is a key barrier to retail development in India. Retail is perceived to be a
low skill, low paying sector in India with very little skill improvement initiatives undertaken by retailers
to improve the quality of their workforce. As per estimates by the Retailers Association of India,
organized retail in India would need an additional 5 lakh people over the coming five years. Lack
of skilled manpower is forcing the retail industry to hire from the aviation and hospitality industries.
Around 40% of the people hired for luxury retail in India are from front end hospitality, but most of
this is a compromise. As per a survey by Luxury Connect, a marketing agency for luxury firms, close
to 70% firm owners and top managers in India would want to hire professionals who are specifically
trained for luxury and most of them are willing to invest in luxury training and education.

19


4.4. Infrastructure and Urban Planning
Constraints
Infrastructure Bottlenecks and Need for Improved Urban Planning
To date, major urban centers in Delhi have not yet successfully used the mechanism of comprehensive
urban planning to guide and control retail property development. This has led to over-development
of shopping centers in certain major retailing hubs, with a number of major malls having recently
been completed or being brought on stream without adequate consideration to the supportable
scale, pedestrian flow management and the presence of necessary, complementary transportation
facilities. For instance, In China, shopping centers built along metro lines with easier accessibility
to mass rapid transit lines perform considerably better than those built in suburbs with inconvenient
public transportation access. One of the key reasons behind the failure of the South China Mall
in Dongguan, China (developed on the lines of the Mall of America, however the project failed to
take off and ranks amongst the highest vacancy level malls with vacancy close to 70%) was its lack
of ready access to convenient public transportation facilities. Indian planning authorities need to
work in conjunction with developers to learn from their global counterparts and ensure that retail
development is not sporadic but is planned in a manner that it emerges as an all-encompassing
self-sustaining unit. In Delhi shopping malls built in close proximity to operational metro lines with
easy accessibility witness more footfall than those built in suburbs with less comprehensive public
transportation access.

Prospects for Large Scale Redevelopment / Renewal
In Delhi, a large number of retail markets such as Connaught Place, Khan Market and Basant
Lok are old and characterized by poor structural condition, sub-optimal utilization of land, poor
urban form, inadequate infrastructure services and lack of community facilities. Basant Lok, for
instance is no longer considered as an ideal destination for leading retailers, in spite of its excellent
location. A major factor that has impacted the previous popularity of the market has been lack of
redevelopment (absence of quality renovation for a long time), and lack of infrastructure availability
(broken walkways, blocked sewer lines; the entrance bears a worn out look). Safety also emerges
as an issue as the market is thronged by unauthorized kiosks, with the area lacking in appropriate
fire safety arrangements. The Delhi Master Plan for 2021 identified incentivized redevelopment of
shopping centers with additional floor area ratio as a major element of city development. However,
neither does the plan provide any concrete structure for the implementation of this proposal nor
have we witnessed any large scale redevelopment activity in the recent past. This impacts the present
retail built form comprising of a large number of old, dilapidated retail structures, which can be
redeveloped into new shopping centers as per the prescribed norms and development controls.

20


5 UNDERSTANDING SIGNIFICANCE OF DELHI AS A RETAIL MARKET – CBRE SURVEY FINDINGS

5

Delhi is among the leading retail markets in the country and is also the top choice for retailers
planning to make inroads in the country. 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. Brands across segments
were analyzed in the luxury, premium and high end categories and presence was judged on the
basis of standalone stores in malls as well as high streets. As luxury brands in India also operate
significantly through boutiques in five star hotels, hence stores in these hotels were also considered
while arriving at the presence of a particular luxury retailer. Bulk of the international retailers
included in the study opted to enter India by opening a store in a Delhi (80%) and then
gradually expanding their footprint to other tier I locations including Mumbai, Bangalore,
Chennai, Hyderabad, Kolkata and Pune. The chart provided below gives a break up of retailers
already operating in India and their preferred cities of operation:

Global Retailers in India: Delhi is the Preferred City of Entry
80
% of Total Brands Present in India

Delhi has 80%
brand presence
when only
brands already
operating in India
are considered
(a sample set of
196 brands), but
the figure falls to
49% when the
entire sample
set of 317
global brands is
considered

Understanding the Significance of
Delhi as a Retail Market in India

70
60
50
40
30
20
10
0
New Delhi

Bangalore

Chennai

Gurgaon Ahmadabad Ludhiana

Amritsar

Lucknow

Others

% of retailers operating in India and present in a city
% of total retailers present in a city*
*The bar refers to the percentage of retailers that are present in a city out of the total sample of 317 brands (which includes brands not
present in India).

Still an untapped market: If we consider all brands that were a part of the research (including the
ones that are not operational in India), the penetration levels give a different picture. As depicted
above, when a sample of 317 leading global brands is considered to assess their presence in India,
penetration levels drop significantly across cities. This implies that India continues to remain a largely
untapped and unorganized retail market, as a large number of prominent global retailers are yet to
establish their footprint in the Indian market. Delhi for instance, has 80% brand presence when
only brands already operating in India are considered (a sample set of 196 brands), but the
figure falls to 49% when the entire sample set of 317 global brands is considered.

21


In order to assess the nationality of the brands which entered Delhi, brands from the United States
accounted for the bulk of retailers in Delhi, comprising 29% of the total. The majority of American
retailers were in the mass market F&B category, such as KFC, McDonald’s and Subway. Retailers
from Italy and UK accounted for about 19% and 13% of the total market, the bulk of which were
brands in the luxury segment such as Hermes, Chanel and Fendi.

Foreign Retailers in Delhi by Country of Origin
Others
19%
US
29%
Japan
2%
Spain
3%
France
3%
Switzerland
5%
Germany
7%

Italy
19%
UK
13%


Segments of Brands Present in India

Delhi has the Largest Concentration of
Luxury Brands in the Country
%
25

Mid End
16%
Luxury
30%

24%

19%

20

15
11%
10
High End
35%

5
Premium
14%


22


0

New Delhi

Mumbai

Bangalore


International retailers in the Luxury Goods sector initially preferred to situate themselves in five star
hotels in selected major cities due to the low penetration of luxury goods in the country and the
lack of dedicated luxury retail locations. Whilst some groups have expanded to shopping malls
as the quality of retail property in India improves, the sector remains a niche market with brands
continuing to be restricted to the tier I cities of New Delhi, Mumbai and Bangalore. Out of the total
number of luxury brands considered for the survey, Delhi leads in terms of presence when compared
to other cities; however Delhi also remains largely underpenetrated when compared to its
global counterparts. Also, while these brands operate in the city, their presence (in terms of number
of stores) and spread (presence across the city) is very limited as these brands generally restrict
themselves to limited number of stores located in specific locations in the city.
While conducting an analysis on the presence of brands across cities, it emerged that leading
metropolitan cities continue to be favored by most global retailers. As can be observed below,
Delhi emerged as the most favored destination by retailers, followed closely by Mumbai
and Bangalore. A good mix of retailers across segments is present in Delhi, with a wide spread
of retailers in the fashion and accessories segment. As compared to its suburbs, high streets and
malls in Delhi have a considerably higher retailer presence. Also, with the recent passage of the FDI
legislations, more than 15 prominent global brands such as Dunkin Donuts, Thomas Pink, Brook
Brothers, Sephora, Hamleys and Starbucks have entered the Delhi market in the past 6-8 months.

Retailer Density and Segmentation Across Cities
150

120

90

60

Accessories
Hypermarket

Beauty

Cash and Carry

Others

Surat

Ahmedabad

Jaipur

Ludhiana

Chandigarh

Amritsar

Lucknow

Kolkata

Pune

Hyderabad

Chennai

Bangalore

Mumbai

Noida

0

Gurgaon

30

New Delhi

Number of Brands Present

Delhi leads in
terms of presence
when compared
to other cities; but
remains largely
underpenetrated
when compared
to its global
counterparts

Fashion, Apparel and Accessories

Others



23


Ranking of Cities as per Retailer Presence
NUMBER OF RETAILERS
PRESENT ACROSS SEGMENTS

CITY RANK AS PER RETAILER
PRESENCE

Delhi

155

1

Mumbai

135

2

Bangalore

102

3

Hyderabad

66

4

Chennai

62

5

Pune

60

6

Gurgaon

57

7

Kolkata

45

8

Chandigarh

30

9

Noida

25

10

CITY


Retail Presence of Brands Across Cities

Avg Rent (INR/SFT/Month) in 2012

400
350
300
250
200
150
100
50
0

2,000,000

6,000,000

10,000,000

14,000,000

18,000,000

Retail Stock (sft)
NCR

Mumbai

Bangalore

Pune

Chennai

Hydrabad

*The size of the bubble represents (in %) the share of global brands present in India for the particular city / region

* The size of the bubble represents (in %) the share of global brands present in India for the particular city/region

24



As indicated in the above chart, most global brands have preferred to enter the country by setting
up base in a metropolitan city such as New Delhi and Mumbai, and gradually expand to other
tier I locations (including Bangalore, Chennai, Pune, Hyderabad and in some cases Kolkata).
These locations became prime destinations mainly due to the high purchasing power of the local
population, which is indicative in the high per capita incomes, presence of a large chunk of working
population and, in particular, a sizable share of households earning an annual income greater than
INR 1 million.

Trends Across Segments
CBRE conducted extensive research across prominent foreign brands operational across various
retail segments in Delhi. Comparisons were made between the average store size in Delhi and their
global specifications in addition to an analysis of trends such as their preferred city of entry and the
location of their stores across the country.
There is a considerable difference in the store size across categories, primarily in the F&B and luxury
goods categories. In the first category most retailers, particularly quick service restaurants, tend to
have smaller store sizes and take-away counters due to consumer preferences and the high cost of
quality retail space in Delhi.
In the luxury goods sector the concept of flag ship stores or multi storey ‘built to suit’ stores has not
yet caught on in the city, primarily due to the high cost of quality retail estate and comparatively
lowers sales volumes. However, the market for such stores is expected to pick up once the luxury
retail market in India matures.
Retailers in the fashion and apparel segment have been performing well in terms of sales and their
shop formats have largely followed global trends. Hypermarkets and cash and carry outlets have had
to adapt to the Indian consumer’s preference for convenient shopping and must be well-located as
the Indian consumer is not willing to travel long distances to shop for even deep discounts.
Sector Trends in the Indian Retail Market

CATEGORY

AVERAGE
INDIAN
STORE SIZE
(SQ FT)

AVERAGE
GLOBAL STORE
SIZE (SQ FT)

PROMINENT
CITY OF
ENTRY

KEY BRANDS

PREFERRED
FORMAT

Food and
Beverage

450 3,000

750 - 2,000
for QSR’s
café’s

Delhi

Subway, KFC,
McDonalds

Malls,
High Streets

Cosmetics

350 - 800

500 - 1,000

Delhi

The Body Shop,
Lush, M.A.C

High
Streets,
Malls

1,000 3,000

flagship and
standalone
stores with
an average
size of above
10,000 sq ft

Delhi

Mont Blanc,
Versace, Louis
Vuitton

High
Streets, Five
Star Hotels

Luxury
Products


25


CATEGORY

AVERAGE
INDIAN
STORE SIZE
(SQ FT)

AVERAGE
GLOBAL STORE
SIZE (SQ FT)

PROMINENT
CITY OF
ENTRY

KEY BRANDS

PREFERRED
FORMAT

Fashion
and
Apparel

800 3,000

1,000 - 3,500

Delhi

Aldo, Jack &
Jones, ONLY

Malls,
High Street

Built-To-Suit,
Malls

Hypermarkets

35,00060,000

80,000 90,000

Delhi,
Bengaluru,
Ludhiana,
Mumbai

Auchan (Max
hypermarket
has partnered
with French
retail giant
Auchan group
recently), Easy
Day Walmart
(domestic
brands such
as Le Marche,
Hypercity,
Spencers are
more popular)

Cash and
Carry

50,000 70,000

85,000 100,000

Delhi,
Bengaluru,
Amritsar

Carrefour, Best
Price-Wal-Mart,
Metro Cash
and Carry

Built-To-Suit

Others*

350 4,000

7,900 - 8,400

Delhi,
Bengaluru,
Mumbai

Apple,
Cannon,
Cinepolis

Malls,
High Street

*Others include segments such as electronics.
Note: 10 prominent brands per retail category have been analyzed for this report
Source: Company Website, CBRE Research

While Delhi is a Key Market, However…
The survey reveals that Delhi is a key retail market for retailers and will continue to remain vital for
retailers planning to set us base in the city. However, for the city to “step up” and reach the next level
of maturity, adequate support from all quarters i.e. from the Central Government, local authorities
and the industry itself is imperative. The city is still a far cry from what its global counterparts have
achieved (discussed below), primarily on account of legislative issues, lagging infrastructure and
the passive role of the industry itself. For instance, while food and grocery has the largest share in
the Indian retail market, hypermarkets and discount stores still remain the most underpenetrated
segment, primarily on account of prior restrictions on FDI coupled with poor logistic infrastructure
of the country. Syndicated efforts from all quarters to overcome the challenges that the Delhi retail
market faces can have far reaching implications for the retail industry and the economy as a whole.

26


6 DELHI AND ITS GLOBAL COUNTERPARTS – KEY LEARNINGS

6

Delhi and its Global Counterparts:
Key Learnings

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 India’s global counterparts have adopted an integrated,
planned approach towards developing large shopping districts. Most successful retail hot spots,
primarily across developing Asia, have specifically designated areas with government thrust
on development. Mixed use developments such as Marina Bay in Singapore or Pudong area in
Shanghai have assisted in uplifting the image of the respective city as a whole and have fuelled
investments into the city and country. While Marina Bay, Pudong and Canary Wharf are all
business districts, these areas have a high volume of retail as well as recreational facilities; all of
which assist these districts in functioning as self-sustaining units. Also, noteworthy is the fact that
the retail spread in these districts does not serve as support retail but attracts tourists as well as
the local population on account of the recreational facilities and shopping ambience these
districts provide.

6.1. Singapore – Marina Bay
In planning for
Marina Bay, much
attention has
been given to
its urban form.
It strikes a fine
balance between
development
intensity and the
desire for scale
and proportion

Urban planning policy has contributed significantly to retailing trends in the newly industrializing
economy of Singapore. A concept plan is devised every 10 years with predefined focus and thrust
areas. The focus of such concept plans has been the spatial distribution of retailing activities originally
concentrated in the Central Area and the development of planned shopping centers. Such retail
developments have simultaneously averted decline in the Central Area and promoted the growth of
suburban retail centers. Singapore’s skyline is a result of careful sculpting in line with urban design
guidelines to create a three-dimensional layered effect.


27


Marina Bay is a strong example of planned mixed use development in the country. In planning
for Marina Bay, much attention has been given to its urban form. It strikes a fine balance between
development intensity, scale and proportion. The development is well supported by infrastructure
such as comprehensive pedestrian network including water front promenade shady sidewalks,
covered walkways, underground and second-storey links and seamless connectivity between
developments and mass rapid transit stations. Within Greater Marina Bay, water taxis offer scenic
rides while doubling up as a mode of transportation. The area has been planned keeping in mind
that the area not only be developed as a business district but needs to have substantial retail and
hospitality mix, thereby making Marina Bay the top tourist spot for tourists coming into Singapore.
The Singapore government pumped in about USD 5.5 billion to build the infrastructural base for
Marina Bay, which also includes the Gardens By the Bay, the Marina Barrage, a Rapid Transit System,
The new Marina Promenade and Double Helix Bridge. Singapore is the second Asian country after
Japan to implement a comprehensive Common Services Tunnel (CST) system to distribute various
utility services to all developments in Marina Bay. The network houses water pipes, electrical and
telecommunication cables and other utility services underground. CST not only improves reliability
of services; it also has the capacity for expansion to meet changing utility needs.
Development initiatives of the government reaped benefits and global investors moved in quickly; the
Marina Bay project has attracted some S$16.5 billion in private investments to date from investors
and developers from the US, Hong Kong, Australia, Europe and the Middle East. It is one of the key
examples of how waterfront business districts help in raising the international profile of the country
while spurring growth and investment.

6.2. Shanghai – Pudong
The integrated
development
of Pudong has
been on account
of numerous
initiatives by the
government – a
concentrated effort
to make Pudong
the engine
of growth for
Shanghai

Located east of the Huangpu River, Pudong is a booming area of Shanghai, China. The development
of Pudong was initiated in the 1990’s, the same period during which investment framework in
the country was liberalized. Pudong has grown rapidly since the 1990s and emerged as China’s
financial and commercial hub. It was also planned as a mixed use development with a good mix
of commercial, retail and hotels. Pudong is home to the Lujiazui Finance and Trade Zone and the
Shanghai Stock Exchange and many of Shanghai’s best known buildings, such as the Shanghai IFC
Mall, Oriental Pearl Tower, the Jin Mao Building and The Shanghai World Financial Center. The
Shanghai IFC Mall is in the center of Pudong’s Lujiazui district providing customers with a choice of
numerous international luxury brands. The six-floor shopping mall covers an area of around 110,000
28



square meters and houses close to 180 premium international retailers. The integrated development
of Pudong has been on account of numerous initiatives by the government – a concentrated effort
to make Pudong the engine of growth for Shanghai. In the first five years alone, the government
poured RMB25 billion into ten major infrastructure projects: two bridges; a gas works, sewage
treatment and water plant facilities; a harbor; a telecommunications project, and an inner ring road.
An investor-friendly climate has helped attract money to Pudong New Area. For overseas investors,
preferential policies are in place, along with lower land prices and other incentives if priority industries
are involved. The government’s hands-off policy and assistance with business partnerships act as
additional motivating factors for investors.
The development of organized retail in China was spurred post 1992, when China started loosening
its strict development regulations. The State Council permitted foreign investment in retailing on a
trial basis in Beijing, Shanghai, Tianjin, Guangzhou, Dalian, Qingdao, as well as the five Special
Economic Zones of Shenzhen, Zhuhai, Shantou, Xiamen, and Hainan. By 1997, numerous foreigninvested stores in China had been approved by the central government. China’s accession to the
World Trade organization (WTO) in 2001 marked a new era for foreign investment in retail. Under
the WTO’s Accession Protocol, the opening up of the retail sector was phased over a period of five
years to December 2006. The framework of rules however, had certain loopholes in terms of clarity
and transparency. With respect to ownership issues between the domestic retailer and the foreign
investor, the Commercial Sector Measures brought out in April 2004 by the Chinese government
were in contradiction with the Accession Protocol as well as the 2007 FDI Guidance Catalogue.
However, in order to provide clarity, the Chinese government’s Administrative Measures for Foreign
Enterprises or Individuals Establishing Partnership Enterprises (2009), permitted foreign investors to
set up retail enterprises in partnership with entities in China.
The Chinese Ministry of Commerce has also been gradually delegating the authority to approve
all foreign-invested retail businesses to provincial commerce branches, facilitating the expansion of
foreign retail players within the country. However, the authority to approve retail businesses involving
items controlled by the state remains centralized. With the onset of a liberalized framework for foreign
investment in the retail sector, numerous brands that set up base in China are operating successfully.

6.3. London – Canary Wharf
Canary Wharf is a major business district located in Tower Hamlets, London, United Kingdom.
Canary Wharf is located in the West India Docks on the Isle of Dogs in the Borough of Tower
Hamlets in East London. After the docks were closed in 1980, the British Government adopted
various policies to encourage the redevelopment of the area, including the creation of the London
Docklands Development Corporation in 1981 and granting the Isle of Dogs an Enterprise Zone (EZ)
status in 1982. In 1987 the Canadian company Olympia and York agreed to construct a major
office and retail development on the Isle of Dogs, with construction commencing in 1988. Today
the Canary Wharf has 14 milion sq ft of commercial and retail space with close to 25 buildings, five
retail malls, connectivity to the city center via the Canary Wharf tube station and two Docklands Light
Railway stations and 20 acres of landscaped open spaces. It also houses the Canary Wharf Ice Rink
and the Reebok Sports Club, the largest health club in Europe.
Numerous factors were responsible for the development of Canary Wharf. A critical event in the
development of Canary Wharf was the push from the government to complete the much-delayed
start of work on the Jubilee Line, the underground tube network. Also all companies locating in the

29


Today the Canary
Wharf has 14

milion sqft

of commercial
and retail space
with close to 25
buildings, five
retail malls

district were provided with financial benefits such as low taxes due to the tax incentives of the EZ and
also low rents in comparison to the city. According to all occupiers, proximity to retail, restaurants
and bars is a major benefit at Canary Wharf today, in comparison to the city. The retail in the city was
said to be much more scattered than in other locations in London and definitely not as accessible
as at Canary Wharf. During surveys conducted on the occupiers in Canary Wharf, the environment,
both externally and internally, was mentioned by all companies as one of the major benefits of the
estate. The external environment is much cleaner with less pollution than in the city, as a result of
less traffic within the area. Prior to development, the Docklands was derelict land, but a significant
asset which, when developed, proved to be beneficial for London, as it provided a retail center for
residents in East London.

Most successful
retail hot spots,
primarily across
developing Asia,
have specifically
designated areas
with government
thrust on
development
30


7 TIME TO TAP OPPORTUNITIES

7

Time to tap Opportunities

The Planning
Commission has
projected that
investment in
infrastructure
would almost
double at USD
1,025 billion in
the Twelfth Five
Year Plan (201217), compared
to USD 514
billion in the
Eleventh Plan

The previous sections of the report brought out the challenges that the Delhi retail market is posed
with, followed up with the fact that the importance of Delhi as a retail destination cannot be ignored.
This brings attention to the point that the market needs to follow a two pronged approach to be able
to match up to the standards set by its global counterparts - overcome the challenges and tap the
opportunities to propel the growth of its retail sector. While demographic factors such as a rising
urban population, expanding middle class are factors contributing to the retail growth story, other
factors such as increased thrust on infrastructure development and increasing credit availability have
provided a fillip to the retail trajectory of the country. Listed below are some of the key opportunities
that are contributing to “The India retail story”.

7.1. Government focus on Infrastructure
Development
The government and planning authorities are fully aware of the importance of infrastructure
development for the growth of several key industries including retail. The Planning Commission has
projected that investment in infrastructure would almost double at USD 1,025 billion in the Twelfth
Five Year Plan (2012-17), compared to USD 514 billion in the Eleventh Plan. As has been observed
across other countries, infrastructure development has been the key stimulator for development of
retail. Marina Bay in Singapore and Canary Wharf in London are both examples where development
of infrastructure such as metro connectivity was cited as a key factor for success of these destinations
as retail destination. Even while looking at data for Delhi; it has been observed that the more
successful mall clusters are located in areas that have lower traffic congestion, easy accessibility
and support infrastructure. The impact that the Delhi Metro has had on connectivity and footfalls
for retail developments (Saket and Shivaji Place district centers) and high streets (Connaught Place)
is something that cannot be ignored. As a step towards enhancing infrastructure growth in the city,
the union budget for 2013-14 allocated almost INR 700 crores to the JNNURM funds for Delhi (an
increase of 27% over previous year); the city also received an allocation of INR 68.39 crores from
the Ministry of Road Transport and Highways.

7.2. Positive Regulatory Moves
Parliamentary approval to the FDI legislation concerning multi brand retail has not only had a
positive impact on the entry of retailers in India but also opened gates for greater investments in
supply chain and logistic infrastructure across sectors, especially agriculture. Though India is the
second largest producer of fruits and vegetables (> 220 million MT), it has a very limited integrated
cold-chain infrastructure, having a total capacity of close to 24 million MT (it can only store 11% of
the actual produce). The cold chain infrastructure in India is highly fragmented and hence, perishable

31

7 TIME TO TAP OPPORTUNITIES

horticultural commodities find it difficult to link to distant markets, including overseas markets, round
the year. As a result, average percentage of wastage of fruits and vegetables is in the range of
5-18%, resulting in an estimated loss of 44,000 crore per annum. Though FDI is permitted in coldchain to the extent of 100%, through the automatic route, in the absence of FDI in retailing; FDI flow
to the sector has not been significant. India offers market potential for cold chain logistic solution
providers, including refrigerated transport services. In addition, companies providing equipment and
technology for pre-cooling, sorting, grading, packaging, and information management systems (for
traceability and tracking) will have good prospects in India.

7.3. Easy Credit Availability
The availability of credit has been on the rise in India, primarily on account of easy availability
of credit cards and loans. This has given a boost to the spending power of consumers, thereby
having a direct bearing on the retail sales in the country. As per the Reserve Bank of India, the total
outstanding amount on credit cards in November 2012 grew at 26% when compared to the same
period in 2011. The growth in point of sale terminals as well as increasing presence of retailers
accepting credit cards for payment is an opportunity which should be tapped for further growth of
organized retail in the country.

7.4. Rise of E-Commerce
The increasing level of internet penetration across the country has given rise to the trend of online
shopping. Data from Google Trends revealed that approximately 8 million people in India were
shopping online in 2012, a growth of 128% as compared to previous year. The most popular
categories emerged as electronics, apparel and accessories followed by beauty and personal care. A
number of shopping websites such as Flipkart, Ebay have emerged over the past couple of years and
have been met with a resounding response. Players are moving in to capture a share in this booming
market and are applying tactics that suit the Indian populace. Adapting to the Indian customer
sensibilities; Flipkart is out-competing the global giant Amazon, simply by tweaking the online
advance-payment-by credit cards to the more acceptable cash-on delivery mode. It is anticipated
that growth in the e-commerce industry will continue to bolster logistics infrastructure across the
country and simultaneously generate demand for organized retail stock in leading cities.

7.5. Favorable Demographics
The real household disposable income in India has more than doubled since 1985. With the rise
in income, consumption patterns have changed and a new middle class has emerged, which is
growing at a fast pace. As per McKinsey Global Institute (MGI), spending in India is expected to
increase about 2.5 times by 2025. The middle class population in India is expected to increase
by about 12 times during 2005-2025, fuelling consumption demand. Disposable income for
households is expected to increase by about three times by 2025, according to MGI. Growing
urbanization, a young working-age population, higher income will result in increased spending
leading to a consumption boom. Growing income and rising disposable income will result in the
discretionary spending to increase from about 52% in 2005 to about 70% of the customer wallet by
2025, according to MGI. The growing discretionary spending will result in demand for appliances,
communication and healthcare.
32


Data from Google
Trends revealed
that approximately

8 million

people in India
were shopping
online in 2012, a
growth of 128%
as compared to
previous year

8 MAKING DELHI INDIA’S RETAIL CAPITAL – KEY RECOMMENDATIONS

8

Making Delhi the Retail Capital of
India: Key Recommendations

It can be observed in the above sections that the opportunities that Delhi can tap are far outnumbered
by the challenges that the city faces. It is important that all stakeholders such as the developers,
retailers as well as the planning authorities make concentrated efforts to provide the sector an
opportunity to realize its potential.
According to Technopak’s “Opportunity India” report, India will require an annual supply of about
20 million sq. ft. of organized retail space in order to sustain growth in the sector. It is in this context
that the role of global retail chains will be crucial. These retailers possess extensive experience of
running successful retail stores and properties in markets such as the US, China, Europe, Middle
East and South East Asia with local partners to create successful shopping formats. By utilizing this
knowledge, they will be able to help usher in a revolution in the development of organized retail real
estate in India. Below are some key recommendations that can assist India in coming up the learning
curve and match up to the standards set by its global counterparts.

8.1. Recommendations for Developers
It is extremely
important to
follow a ‘lease
only’ model in
a retail center
as this helps
developers
control tenant
positioning
and manage
common areas
more effectively

Planning and Design: Developers must conduct initial feasibility studies taking into consideration
the demographics in their catchment area, the targeted consumers’ behavior and the prospective
retailers’ preferences and expansion plans towards their proposed projects before they commit any
investment funds. The macro-economic environment of a particular location, its prospective growth
and purchasing power of key catchment zones must be studied before selecting the ideal location
for development. The design must take into account circulation, store visibility and an understanding
of the shopping behavior in the mall to structure the tenant mix accordingly.
Ownership Strategy: Developers should hold their projects in single ownership so as to pro-actively
control their tenant mix and trade mix. It is extremely important to follow a ‘lease only’ model in a
retail center as this helps developers control tenant positioning and manage common areas more
effectively. Many developers tend to view malls as just real estate and as an investment from which
they wish to achieve a short term profit. However, the desire to sell a portion of the mall on a
strata title basis means the builder does not maintain the facilities property and enables investors to
resell their shops, which ends up ruining the tenant mix. In order to achieve a more balanced and
synergized trade and tenant mix developers require knowledge of shop alignment by industry or
market positioning. Proactive tenancy leasing, screening and management are also essential.
Location and accessibility: Although no longer an exclusive success factor, location and catchment
are of crucial importance to mall revenues. Shoppers in India are still willing to travel long distances
to visit shopping malls offering them an attractive shopping experience but the mall should be
positioned within or next to an appropriate catchment area for its target customers. In New Delhi


33


shopping malls built in close proximity to operational metro lines with easy accessibility witness more
footfall than those built in suburbs with less comprehensive public transportation access.

8.2. Recommendations for Retailers
Investing in HR skills: Developed retail economies such as the US, UK, Australia all offer numerous
retail focused bachelor and post graduate programmes, which serves as a critical component for the
successful functioning of their retail industry. The right talent assists in not only providing the customer
an experience, it also assists in providing consumer insights which go a long way developing product
strategies and customer attraction/retention strategies. There is not only a dearth of people enrolling
for these courses, but also a dearth of experienced faculty that can train students in courses such as
visual merchandise, store operations and supply chain management. Retailers in India, in conjunction
with the government and education authorities should stress on providing training programmes and
retail specific degrees (as done in the US with collaboration from leading retail companies). The
availability of retail specific programmes and training institutes is critical in ensuring the availability
of the right talent, thereby enhancing customer experience and footfalls.
Invest in Supply chain infrastructure: The retail sector is heavily dependent on the supply chain
and logistics sector to allow it to run a smooth operation. The government allows for 100% foreign
direct investment under the automatic route in the storage and warehousing sector. The Free Trade
Warehousing Zone Scheme (the FTWZ Scheme) had been unveiled by the government to spur
investments in this space. The FTWZ Scheme envisions the creation of infrastructure for warehousing
of various products, as well as transportation and handing facilities to support the integrated zones
as international trading hubs. Global hypermarkets bring along with them expertise in developing
cold chain infrastructure. Development of an effective cold chain infrastructure can go a long way in
benefiting the retail industry by cutting down losses and providing increased value to the customer.
This will also help in narrowing down the gap that stands today between the prices of the local/open
market and hypermarkets.

8.3. Recommendations for Planning Authorities
Establishing a direct buyer seller relation: A direct buyer-seller platform would be beneficial
for both retailers as well as consumers – it would ensure that farmers are connected to the urban
economy while buyers would be able to achieve better value for money. A case in point can be
taken from Argentina, where the Competition Commission formulated a national regulation to
closely regulate supermarkets and their relations with suppliers—if the retail, wholesale, processing,
and farming sectors did not formulate and self-implement a private code of commercial conduct.
Retailers and suppliers signed the Code of Good Commercial Practices in 2001, the first of its kind
in Latin America.
Establishing local regulatory bodies: While a national regulator is of prime importance in India,
local regulatory authorities can be of immense significance in supporting the development of local
retail markets. For instance, in Japan, The Ministry of Economy, Trade and Industry (METI) designed
Store Location Law (SLL) that gives local governments the primary responsibility for the regulation
of large stores, subject to certain constraints. The focus of the new regime was to preserve the
physical environment around new stores from the previous regulation that focused on protecting
34



small retailers. A new large stores law was introduced that gives powers to local authorities to
regulate retail outlets that were in the range of 500 -1,500 square meters. The authorities have the
power to determine the size of the store, working hours and even the number of holidays.
Reforms in real estate norms: Reforms in land use regulations, the Rent Control Act are needed
to ensure that these acts are in tandem with the current market dynamics. Planning agencies must
ensure an increase in the land allocation for retail development in the city and propose a structured
mechanism for city level retail redevelopment/renewal. The Master Plan which currently allows for
5% land allocation for retail, exerts pressure on real estate capital values and rentals due to limited
land availability. Factors such as high stamp duty also impact the budget outlays of retailers. Greater
land allocations and rationalization in stamp duties can go a long way in providing an environment
for a thriving retail sector.

The FTWZ
Scheme envisions
the creation of
infrastructure for
warehousing of
various products,
as well as
transportation
and handing
facilities to
support the
integrated zones
as international
trading hubs

35

9 CONCLUSION

9

Conclusion: Recommendations
can reap significant benefits

While there is no doubt that organized retail in the city is poised for significant growth with factors
such as favorable demographics, easing credit availability and increased exposure to global markets
setting the stage for the industry’s success, however, the pace of this growth can be propelled by
moving in to address the challenges that the industry currently faces. The government’s recent move
to open the country’s retail sector to foreign supermarkets has been anticipated for some time and
is regarded by many analysts as being crucial to re-launching the country’s flagging economy.
Supporters of the new policy say the entry of international supermarket retailers will help bring down
soaring prices, make the retail sector more competitive and help modernize the country’s ageing
infrastructure and distribution systems. Small and medium sized family-run retailers will survive, they
say, as they offer a valuable local service that large supermarkets are unsuited to provide.
The amendment to APMC Act in the form of Model Act includes various action points such as
modernization of the Azadpur Mandi and numerous efforts to establish direct contact between
farmers and consumers. The government, with such well punctuated moves can act as an enabler
by providing a conducive environment for the industry’s functioning while retailers can move into
play a more active role and drive initiatives at their end. A regular, well developed channel of
communication needs to be developed between key retailers and the government in order to
understand the requirements of modern retail. Developers will have to sacrifice short term gains
and develop malls that meet global standards and consumer expectations. Engaging professional
firms for their premise management will serve as an investment that will go a long way in generating
returns and creating brand value.
With all push and pull factors working in the favor of the industry, it will not be long that retail would
drive the city’s and the country’s growth.

36


ABOUT CII

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38


CBRE Research Team
Contacts:
Abhinav Joshi
Senior Manager
Research
CBRE South Asia Pvt. Ltd
abhinav.joshi@cbre.co.in

Vidhi Dheri
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Research
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Amritha Marshall
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Corporate Communications
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