Small cities to drive retail boom

The domestic retail industry is expected to attract about Rs 2,500 crore (Rs 25 billion) investments in the next two-three years and the retail boom will percolate to smaller cities with population less than 10 lakh, according to a new study by consulting firm KSA Technopak.

The country is currently in a development phase marked by rapid pace of creation of retail infrastructure.

Investments into the Indian retail sector are estimated at Rs 2,000-2,500 crore (Rs 20 to 25 billion) in the next two-three years and Rs 20,000 crore (Rs 200 billion) by 2010, as per the study by KSA Technopak and ICICI Property Services.

The retail industry is currently at Rs 9,30,000 crore (Rs 9300 billion) and estimated to grow at 5 per cent per year.

Organised retail, which contributes only three per cent at present, will grow by 25-30 per cent every year from Rs 28,000 crore (Rs 280 billion) to Rs 35,000 crore (Rs 350 billion) by the end of 2005 and Rs 100,000 crore (Rs 1000 billion) by 2010, KSA Technopak said on Tuesday.

The retail boom, 85 per cent of which has so far been concentrated in the metros, would also percolate to Tier-II cities with population of 5-10 lakh.

These cities would see major retail format development of less than 100,000 square feet by 2006, it said, adding the contribution of these cities to organised retailing sales would grow to 20-25 per cent.

Prominent Tier-II cities which are likely to witness a pick-up in retail activity include Surat, Lucknow, Dehradun, Bhopal, Indore, Baroda, Nasik, Bhubaneshwar and Ludhiana.

The availability of cheaper real estate options and brand acceptance among consumers in these cities is leading retailer and property developers to break-even much faster as compared to larger cities, the study said.