The real estate sector in India has responded well to the growth of the organised retail sector and this has led to a phenomenal rise in supply of space for organised retail operations year after year.
Mall space, from a meagre one million square feet in 2002, is expected to touch 40 million square feet by 2007 and an estimated 60 million square feet by end-2008.
Though organised retail activity in India is concentrated in the two major metros of Delhi and Mumbai, these still have considerable opportunities on offer, reveals a study by Jones Lang LaSalle Meghraj on the Indian retail sector.
Titled 'Geography of Opportunity - The India 50', the study says Delhi and Mumbai will account for 40 per cent of national organised retailing by 2008 and are expected to lead the Indian mall culture with estimated total mall stock of 22 million and 15 million square feet respectively by 2008-09.
The study also identified 50 cities across India that are positioned to benefit from the booming retail sector and these have been classified categories according to socio-economic characteristics, retailer activity and shopping mall development.
Jones Lang LaSalle Meghraj has identified five types of cities and classified them under the titles maturing, transitional, high growth, emerging and nascent.
These indicate cities at a different stages of the retail market evolution, with each type offering different types of opportunities for retailers and the property sector.
The 'maturing' cities are Delhi/NCR and Mumbai and they are 'head and shoulders' above the other Indian cities in terms of number of shopping malls and organised retailers.
Competition within the NCR and Mumbai are expected to intensify as supply grows and there is risk of saturation in some market segments by 2008.
NCR and Mumbai will unquestionably continue to dominate the Indian retail scene, and the study predicts that despite strong growth in secondary and tertiary cities, these two metros will account for 40 per cent of India's organised retail sector by 2008.
The 'transitional' cities are now firmly making their mark on the retail sector. Whilst organised retailing is a more recent phenomenon in them than in the NCR and Mumbai, they are catching up as both retailers and developers tap into their large middle classes.
In this category are the cities of Bangalore, Kolkata, Hyderabad, Pune and Ahmedabad, all of which have significant mall development in the pipeline. Activity is also expected to accelerate in Chennai.
By 2008, these six transitional cities are likely to account for one-third of India's organised retail sector.
Developers in Bangalore appear to have drawn up the most aggressive shopping mall development plans, in response to demand from a wide variety of retailers attracted to the city's increasingly cosmopolitan population.
The city is also a favoured market to test new retail concepts. The 'high growth' cities are a small group, which have over the past year entered a high growth phase.
They include cities with substantial consumer spending power like Ludhiana, the tourism-driven city of Jaipur, rapidly-growing IT hubs like Chandigarh and Kochi, as well as some medium-sized cities like Lucknow, Surat and Vadodara.
These high growth cities, mainly located in northern India, are perceived by retailers as the 'next retail destinations'.
Chandigarh, Ludhiana, Jaipur, Lucknow and Kochi lead the pack, characterised by high levels of shopping mall development and significant retailer interest.
The 'emerging' cities have been branded thus on the basis of plans drawn up by major hypermarkets and department store retailers for the future and this group of six 'emerging' cities are likely to be the next growth markets over a three-year horizon.
Factors such as growing incomes, rising aspirations, scarcity of branded stores and growing corporate activity are leading to a rise in demand for organised retailing in these cities.
The urban centres in this category include Nagpur, Indore, Nashik, Bhubaneshwar, Vizag, Coimbatore, Mangalore, Mysore and Thiruvananthapuram.
At these centres, IT/ITES companies are rapidly expanding their workforce, which in turn is stimulating retailer activity.
This group also includes some major tourist destinations such as Amritsar, Agra and Goa and a number of southern Indian cities, which have so far been less impacted by organised retail.
The 'nascent' cities are a group of a further nine smaller cities, most of which have populations of up to 500,000. They are classified 'nascent' largely because at present, they have low per capita incomes and limited corporate activity.
Organised retailing is currently very limited, but they are on the 'watch list' of pioneering retailers and mall developers that are seeking to benefit from first mover advantage.