India Market Watch: Rental Rates Soar in India’s Malls and the UAEIIC to Participate in UAE-India Economic Forum

August 10, 2016 Posted by India Briefing Reading Time: 5 minutes

Robust Demand Pushes Rental Rates Up at India’s Premium Malls

A report by property consultant CBRE South Asia Pvt. Ltd. shows that rental rates at India’s premium malls have significantly risen in the first six months of 2016. The biggest rise in rental rates were noted in the following major cosmopolitan mall clusters – Noida (rising by 45 percent), Gurgaon (30.8 percent), Vasant Kunj (28.6 percent), and East Bangalore (10.5 percent). Region wise, rental rates have increased in the National Capital Region centered around Delhi (Vasant Kunj, Saket, and Gurgaon), Mumbai (Kurla, Ghatkopar and Lower Parel), and Bangalore (Whitefield, Ulsoor, and areas in West Bangalore).

The steep rise in rent is due to the robust demand led by international retailers, and rapid expansion plans of established retailers. For example, during the first half of 2016, Swedish clothing retailer Hennes & Mauritz (H&M), US clothing company GAP, Japanese lingerie brand Wacoal, and Dutch brand Hunkemoller opened new stores in India, while the more established retail stores – Shoppers Stop, Levi’s, Puma, Pepe Jeans, Fabindia, GAP, Haagen-Dazs, and Mebaz – further expanded their outlets. A gap between the demand and supply is also to blame, as building malls is a capital intensive activity and completion of projects may take up four to six years.

However, the rise in rent and demand is restricted to premium markets. In another report, by property consultant Jones Lang LaSalle (JLL) India, findings indicate that tier 2 cities and even average and poor malls in tier 1 cities, continue to struggle with high vacancy rates, which began with the global financial crisis of 2008. Poor consumer and retailer sentiment has also prompted several mall developers to shelve or defer new projects across the country. The JLL report estimates that rental rates in premium markets will stay constant or increase till the gap between demand and supply gets bridged in about five to seven years.

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Urban Markets Key Growth Prospects for Packaged Goods Firms in India

Market researcher Nielsen recently reported that packaged goods manufacturers should focus on penetrating the urban market in India. Consumer packaged goods include biscuits, branded edible oil, beverages, and other household products that are consumed every day, and comes under the fast-moving consumer goods (FMCG) sector.

Data from the last fiscal year (2015-2016) shows that India’s urban markets were underserved by packaged goods makers. Meanwhile, rural purchasing power has suffered after two consecutive years of drought. Leading companies such as Hindustan Unilever Ltd (HUL) and Dabur India Ltd have both seen a decline in growth in sales volumes due to this rural slowdown. Consumer packaged goods companies can compensate for the rural slack by expanding their urban presence in India’s multitude of metro cities. Metro cities are those with a population of at least one million, and the Census 2011 data establishes 53 such metros in India. Nielsen estimates that for packaged consumer goods, the average per capita consumption in the top eight metros is worth US$ 97.53 (Rs 6,500) every year; this drops to US$ 72.02 (Rs 4,800) in the other metros but is still more than four times the average rural per capita consumption of US$ 16.50 (Rs 1,100). The payouts from the Seventh Pay Commission will additionally boost urban growth this year.

Finally, while the leading companies in the sector may not find it difficult to expand their reach, influencing consumer spending patterns will become the next big challenge.

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UAE International Investors Council to be a Strategic Partner in UAE-India Economic Forum

The UAE International Investors Council (UAEIIC) recently announced its participation in the second edition of the UAE-India Economic Forum (UIEF) as a Strategic Partner. The Forum is scheduled for October 19th – 20th, 2016. Senior members of the UAE council will take part in panel discussions focused on the expanding investment opportunities available in India.

The UAEIIC membership consists of a mix of government and private bodies, among which are the Federal Ministries of Economy; Foreign Affairs and International Cooperation; and Ministry of Finance, as well as the General Civil Aviation Authority, and 12 of the biggest companies in the UAE (Mubadala, Emaar, Etihad Airways, Etisalat Group, DP World, Dubai Investment, Thani Investment, Al Futtaim Group, Al Fahim Group, Sharaf Group, Borouj and IPIC). Their participation holds key to the UAE-India Economic Forum, which aims to diversify and strengthen the bilateral partnership between India and the UAE.

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