Realty retail: Ahmedabad is not among top seven Indian cities, comparable to cities in transition in China

Counterview Desk
Jones Lang LaSalle (JLL) – a consulting firm with headquarters in Chicago and presence in 70 countries across the world and involved in commercial real estate services and investment management – has not included Ahmedabad in the top seven cities of India, which are “comparable to some of the Chinese cities that are in transition.” Titled “Retail Realty in India: Evolution and Potential: A Comparison and Contrast with the Emerging Cities of Asia”, the firm’s study has ranked Ahmedabad No 8 in the list of 10 top cities selected for real estate retail.
While the study refers to what it calls “the ruling government in India’s policy paralysis” it believes, if Indian cities are to develop further, India must open up to foreign direct investment (FDI) in retail. While “the policy makers are willing to relax norms and embrace liberal policies in order to receive more investment”, JLL has sharply attacked the BJP’s stiff opposition to retail in FDI and what it portends for future. “Certain large political parties have vehemently opposed FDI in retail. Fear of FDI policy reversal could arise if those parties come to power post upcoming elections”, it says.
In its study, the consultants say, “The cities we compare in Emerging Asia are a mix of Tier I (Mumbai, NCR Delhi, Bangalore, Chennai, Shenzhen, Jakarta, Manila, Bangkok and Hanoi), Tier II (Kolkata, Pune and Hyderabad, Chengdu and Shenyang) and Tier III (Changsha and Hefei)”, adding, “Within India, the Tier I and Tier II cities of Mumbai, NCR Delhi, Chennai, Kolkata, Bangalore, Pune and Hyderabad are the leading cities for retail as well as real estate operations. These cities account for over 70% of the country’s total retail stock.”
The JLL says, “While NCR Delhi has a large retail stock that is comparable with leading Chinese and Emerging ASEAN cities, stock in Mumbai is largely comparable with the Tier III cities of Changsha and Hefei in China. The gap between the retail stock of NCR Delhi and Mumbai seems high given the small income gap. Mumbai has recently witnessed major improvements in infrastructure, which could help the city to spread its retail penetration further.”
It adds, “Bangalore and Pune have a large commercial base, higher per capita income (after Mumbai and Delhi) and a relatively low level of retail stock. These two cities house a large concentration of IT/ITeS companies, which is the largest occupier of office space in India and generates huge employment opportunities.” Following the seven cities, it refers to Ahmedabad, and says, “In terms of quantum of retail mall development, Jaipur stands ahead of Ahmedabad and close to Chandigarh.”
JLL believes, India has seen “a significant shift across all real estate sectors in recent years, thanks to its excellent infrastructure, fast growing per capita expenditure and consumerism, and the increasing number of migrants from many parts of the country because of its tremendous employment opportunities”. The industrial base of the city, it believes, is a “key contributor to booming real estate development”, adding, “The city has great potential for further growth.”
Placing Ahmedabad alongside Chandigarh and Surat, the study says, these are the “next three best cities after the seven major metro cities of India”. They have “high immigration, excellent infrastructure, increasing per capita income and propensity to consume are key drivers for high market potential in cities of Ahmadabad, Surat and Chandigarh. The growing office market is another important factor for retail development in Chandigarh and Ahmedabad.”
Suggesting that Surat has improved itself, the study says, “During 2011, Amritsar was ahead of Surat in market potential, but at end-2013, Surat was much ahead of Amritsar in market potential.” The study yet another Vadodara, at par with “Nagpur, Coimbatore and Lucknow” which “have emerged as high-potential markets in 2013”. Then come “Jaipur and Ludhiana”, which have “attained significant growth in retail maturity in 2013 compared to 2011. Cities such as Kanpur and Raipur are slowly moving up in their market potential and retail maturity index.
While analyzing Indian cities, the consulting firm has taken into account several parameters for demand potential, including the migrant population, which “not only adds to the consumer base, but also is likely to be more accepting of malls versus high street”. Age and education are taken into account to identify if “the young and educated population drive consumption as well as have a higher preference for malls”.
Other factors include income and expenditure of “high-income households” to see how many earn “above or equal to Rs 5 lakh per annum” find out Market in order to ascertain the Market Potential Index; presence of household electronics and vehicles used is measured for identifying “consumerism”; and media consumption is analysed because it “exposes consumers to advertising and is hence likely to foster consumerism”.

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