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Delhi NCR dominated the retail real estate market with a substantial consumption rate and 60% of leasing activities in H1 2023. Its impressive infrastructure and prominent market position along with demographic consumption has continued to attract domestic and foreign retail brands. Uddhav Poddar, CEO, of Bhumika Group sharing his experience of developing, leasing, and launching a retail mall in Udaipur said, “Our concept began 5-6 years ago when we first visited the vacant land. Despite initial skepticism, a million-square-foot project was developed in the tier 3 city of Udaipur. COVID-19 disrupted plans, but retail even eventually recovered leading to better tenants and partnerships with improved rates. Since December, about 95 stores, including major brands, opened in this successful first retail venture in a tier 3 city.”
Discussing the reasons be- hind India having lowest per capita square footage compared to western countries, he added, “The development of high-quality assets in India faces challenges due to limited capital and lengthy retail project's timelines, leading devel- opers to prefer low-effort projects like residential and office spaces. According to an industry report, India's total commercial supply is less than that of Tokyo. Despite the fact that 22% of supply originates from the NCR, it remains insufficient due to high demand.”
Diwanshu Mittal, Head of North India Anarock, was of the view that the new supply of retail real estate space is expected to rise 43 percent across seven major cities by 2027 with Delhi-NCR being a front- runner in this growth. “Delhi-NCR boasts the highest share among top seven cities, with 28 million square feet of retail space in malls. In Delhi NCR, H1 2023 witnessed a 60% growth in NCR retail leasing, reflecting trends from 2007, 2011, and 2015,” he stated
Highlighting the change in dynamics post covid in consumer behavior, Uddhav Poddar said, “The food and beverage sector has grown significantly to 3-4 times pre-COVID levels, raising their share in the planning of retail malls. In our Udaipur mall, even 25% of space is insufficient. In a new Faridabad development, nearly half of the total area is dedicated to F&B es- establishments. This behaviour is the result of the adoption of Western per- perspectives as well as the rise in nuclear families with increased dining out for leisure and celebration, especially in the NCR region. And this trend is expected to continue.”
Diwanshu Mittal pointed out, “In the Delhi NCR area, around 105-110 malls operate, yet only 12-15 malls experience significant demand, while the rest face high vacancy rates. This highlights the need for property developer’s active involvement and long-term planning to ensure a successful retail development.”
Uddhav Poddar stated that despite the challenges, Delhi NCR remains the top-performing retail market with 7-8 of the top 20 malls, attracting shoppers from tier 2 cities for fashion and wedding attire. This shopping preference over Mumbai has existed for 20- 30 years, contributing to Delhi's market dominance.” He further stated, “Delhi NCR has higher re-tail trading density due to extreme seasonal fluctuations, with winter clothing demand contributing to larger basket sizes. This gives Delhi an advantage over cities like Bom- bay or Chennai. Retailers report higher sales during winter months in Delhi.”
THE NEW GROWTH CORRIDORS
Cities like Faridabad, Gurgaon, and Noida in the National Capital Region experienced growth due to recent high-quality developments. Sharing his opinion on these sat- ellite towns in the NCR and which unpenetrated areas within the NCR could emerge as new growth cor- ridors, Uddhav Poddar elaborated, “Due to limited development land available in Delhi, Gurgaon has seen significant growth in retail real estate, while Noida's \ airport development has been the driver of real estate in general and retail in particular. Faridabad's strategic location bolsters its residential and retail revival, with new food court corridors offering retail developer ample opportunities.”
Diwanshu Mittal said, “Delhi-NCR is witnessing several high-quality retail projects and now we have seen the first retail REIT debuting last year. Emerging retail hotspots like Noida, Greater Noida (West), Yamuna Expressway, and Faridabad offer prime opportunities for retailers to establish a presence.
Whether the current development fills the existing gap or contributes to an over-supply, Uddhav Poddar stated, “The potential over-supply issue in the NCR region will likely be offset by the long construction timeline of 3-4 years and ongoing urbanization. Temporary struggles in certain micro-markets may occur, but malls in those areas can adapt and compete effectively with larger establishments nearby to minimize the impact on the overall market.”
Diwanshu Mittal added, “Delhi NCR's status as a top retail hub but with limited infrastructure and land has led to the growth of regional shopping destinations. Large and small shopping centres will continue- ue to persist, with bigger centres for monthly purchases and neighborhood markets for daily needs. However, shopping centres would need unique offerings to rival online retailers.”
Uddhav Poddar agreed, “The growth in infrastructural quality and development has pushed the boundaries of retail space development extending to smaller cities around Delhi-NCR. With growing demand. this trend will further increase in the upcoming quarters.” Concluding the discussion, the speakers shared their final remarks. Uddhav Poddar said, “Working in Delhi and NCR proves more expensive than cities like Dehradun for example; however, the higher re- turns justify the investment. Developers are attracted to Delhi- NCR due to potential rental income and yields from these developments.”
“A holistic government approach promoting innovative technologies can guide developers towards sustainable development and address construction bans and rise in project costs, as we have recently seen in Delhi NCR region,” stated Diwanshu Mittal.
TIER 2 AND 3 CITIES AND METRO’S PERIPHERAL SATELLITE CITIES PRESENT AN UNTAPPED POTENTIAL FOR RETAIL REAL ESTATE EXPANSION. HIGH STREET SHOPPING AREAS TOO ARE GETTING POPULAR, CATERING TO SPECIFIC CONSUMER NEEDS AND PREFERENCES.
MALL PLANNING SHOULD PRIORITIZE CUSTOMER BASE AND LOCATION, FOCUSING ON PROPER ZONING RATHER THAN JUST SALES AND LEASING- DIWANSHU MITTAL
NCR'S HIGH MARKET DEPTH AND TRADING DENSITY MAKES IT APPEALING FOR RETAIL EXPANSION, DESPITE ITS SUBPAR RETAIL INFRASTRUCTURE- UDDHAV PODDAR
CHALLENGES
A lack of understanding of the retail industry
Previous setbacks
Well-performing real estate sector’s shifting focus
Banks' unwillingness to lend further contributes to the challenges.
Overlooking tenants' needs and appropriate zoning, leading to inadequate projects
