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Real estate players such as DLF & Unitech build hopes on retail FDI decision

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Real estate players such as DLF & Unitech build hopes on retail FDI decision

Last updated: November 26 2011
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  • Real estate players such as DLF & Unitech build hopes on retail FDI decision

    NEW DELHI: The government's decision to allow 51% foreign direct investment in multi-brand retail and increase FDI limit in single-brand retail to 100% comes as a whiff of fresh air for the real estate sector, which has been battling slow sales and rising debt for almost two years now.

    The cabinet's decision on Thursday may not make a big impact in the short-term, but it is expected to prompt real estate players who had either shelved or slowed down their plans to build malls and shopping complexes over the past few years, to revive their plans.

    Rajeev Talwar, executive director of India's biggest real estate player, DLF, which has huge interests in retail, said, "We are moving ahead with our retail plans in strategic locations. You can expect a huge demand and supply of quality real estate over the next two years from a number of developers."

    Real estate analysts point to the fact that there isn't enough quality real estate in the country today, especially in the smaller towns. "But if demand goes up, it will give confidence to real estate developers to make big investments," said Anshuman Magazine, managing director of CB Richard Ellis, an international property consultancy.

    With the likes of Carrefour, Walmart and Tesco, among others, likely to enter the retail business in India once they are finally allowed, the Rs 22,000-crore retail real estate market is expected to grow at a CAGR of 25% a year for the next five years, growing at 50-100% after the second year, consultant Jones Lang LaSalle India said in a recent report.

    Sanjay Dutt, chief executive officer, business, at Jones Lang LaSalle India, recently told ET, "Today, there are only a handful of Indian corporates who have gone into retail and only with a few formats. We need a more competitive environment. With this, muchneeded capital too will come into the country for retail which will mean job creation, investments by organised players, and very importantly training."

    This will be a big opportunity for developers like Unitech, DLF and Oberoi to re-evaluate their retail plans. With the opening up of new categories of stores, developers will be able to fill up spaces and the pricing dynamics should get better.

    For instance, Unitech has recently announced a revamped retail strategy. It will spend about Rs 2,000 crore to develop eight malls, which are under construction at the moment and another four are being planned. An executive said that the move to open up FDI in multi-brand retailers would give developers more options to choose from, especially when looking for large anchor tenants.

    "This could mean new retail spaces will be launched but if they are over priced, it will pose problems for the sector as a whole. Some of the bigger retail players might then want to get into retail real estate development to build their own malls. They could then look at smaller cities also for developments," added Pinaki Ranjan Mishra, partner (retail & consumer practice) at Ernst & Young.
  • #2

    #2

    Re : Real estate players such as DLF & Unitech build hopes on retail FDI decision

    Same set of jokers

    New pasture but the same black sheep out to graze.....

    Soon retail will be the new telecom and Anand Sharma be the new Raja

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    • #3

      #3

      Re : Real estate players such as DLF & Unitech build hopes on retail FDI decision

      Unitech to invest Rs 4,000 crore to develop over dozen malls

      NEW DELHI: Anticipating increase in demand for space following opening up of FDI further in retail sector, realty major Unitech will invest up to Rs 4,000 crore to develop 13 shopping malls over the next four years.

      The company is also scouting land for another five malls in the metros and state capitals.

      "We have nine malls under construction at present and we have bought land for another four malls. The total leasable area in these 13 malls will be 4 million sq ft," Unitech Head (Retail) Munish Baldev told PTI.

      The nine malls that are under construction would be operational by 2013-end, he said, adding that the construction of the remaining four malls would start in third quarter of 2012.

      Asked about investment, Baldev said: "The total project cost to develop 13 malls, comprising four million sq ft of area, will be between Rs 3,500 crore and Rs 4,000 crore."

      The investment will be funded through internal accruals and debt, he added.

      The company currently has three operational malls in Noida, Delhi and Gurgaon with a total area of 1.3 million sq ft since 2006.

      The upcoming malls would be in Noida, Kochi, Bhopal, Bhubaneswar, Bangalore, Dehradun, Mohali, Lucknow, Gurgaon, Hyderabad, Mumbai and Kolkata.

      Baldev said all the stakeholders would benefit from the government's decision to allow 51 per cent FDI in multi-brand retail and increase of FDI limit in single-brand retail to 100 per cent.

      "We have always been bullish about the retail development space...the increased foreign investment in retail sector will create more jobs, improve supply chains and have a salubrious effect on retail prices," he added.

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      • #4

        #4

        Re : Real estate players such as DLF & Unitech build hopes on retail FDI decision

        Retail FDI could spur sales and demand of flagging realty

        Industry doyens have termed it a “win-win” for the retail sector and hailed it as a policy that will help the sector grow, bringing much needed capital in the area. But, guess who else is smiling?

        No, it’s not yet the customers — but instead, the realty sector.

        The real estate sector, which has been seeing slow sales and increasing debt, is hopeful that the new policy will give a fillip to its flagging stocks.

        The market on Friday saw real estate stocks chase the bourses following the announcement by the government to permit 51 percent FDI in multi-brand retail and 100 percent in single brand.

        Many real estate players in the past couple of years had either shelved or postponed their plans to build more projects, due to low demand-supply dynamics. Reuters
        DLF closed up 3.24 percent at 203.95 and Oberoi Realty was up 2.04 percent closing at 220. BSE’s Realty Index shot up to 1620 just before noon and closed 1.32 percent higher than its previous close of 1,558.74 at 1,579.30 — in a market where other sectors barely managed to stay in the positive, even as the Sen fell 1.03 percent to 15,695.43.

        The cabinet’s decision may not yet be law, but that did not dampen the spirit of real estate experts, who are hopeful that the increase in demand on space from foreign retailers like Wal-Mart, Carrefour and Tesco will revive their stagnating industry.

        Many real estate players in the past couple of years had either shelved their plans to build more shopping complexes and malls or postponed them — due to low demand-supply dynamics, high construction and materials costs, and also pricing dynamics that affect the buyer.

        With the government opening up the retail sector to more FDI, real estate promoters are expecting an increase in demand and a boost in sales and space rentals.

        The Economic Times has reported that Unitech has recently announced a revamped retail strategy and said it will spend Rs Rs 2,000 crore to develop eight malls under construction and another four that are being planned.

        Executive director of DLF, India’s biggest real estate player, Rajeev Talwar, told the Economic Times, “We are moving ahead with our retail plans in strategic locations. You can expect a huge demand and supply of quality real estate over the next two years from a number of developers.”

        Pradumna Kanodia, finance director of Phoenix Mills, told CNBC-TV18 that he expects to see a 25-30% increase in rental charges with the opening up of the retail sector to foreign players.

        “Impact of the increase in rental will be seen in FY12,” Kanodia said, adding, “As new brands and new investments come in, the demand for quality retail space will be increasing and we anticipate at least 25-30 percent increase in rentals going forward.”

        Phoenix Mills has more than five million square feet of mall space being operationalised — with malls in Bangalore, Kurla and Pune. The company has also tied up with its peers who are offering the same service in tier-II towns in the country.

        According to a recent report by Jones Lang LaSalle India, the retail real estate market — pegged to be worth Rs 22,000-crore — is expected to grow at a compound annual growth rate (CAGR) of 25 percent each year over the next five years.

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