Articles

About the Writer

Arif Sheikh

A retail executive with 23 years experience, Arif Sheikh has earned great reputation among colleagues, clients & competitors through his ‘dedication’ & ‘aggressive strategies’ which - stimulate revenues, sale patterns, customer base and consistently drive organizations to reach celestial heights of success & profits. Sheikh has bagged many awards & accolades including - Dubai Shopping Festival Best Retail Chain / CEO Awards – 1999; Global Retail Forum; Pantaloon/VM&RD Design Awards – 2006 and Asia Retail Best Speaker Award – 2008 etc.

Sheikh has attended various retail forums in India and abroad as speaker apart from streak of retail articles and various publications, books on shopping mall etc. 

Here’re few articles written by Arif Sheikh which we believe will help readers to grasp the gist of retail & real estate sector. 

Mirage in the Retail Desert – Part I

Contrary to observed perception, I think retail still holds good. Following are a few known facts on retail and real estate to elaborate the viewpoint.

Retail Pointers

1. Biggest retail companies from USA took more than 10 to 15 years before rolling outside the country. Despite having worked in more or less homogeneous domestic market in terms of language and key business laws, they still failed in many markets as they could not adapt and customize to new market needs. Though they had developed supply chain facility, mature vendors, strong private label brands even in t he markets that they entered.

Compare this with Indian retail companies which worked in such a heterogeneous market where nothing is common in terms of consumption pattern or psychographics across Delhi and Chennai or Kolkata and Jaipur, a rudimentary supply chain and no national vendors or transporters, and adversarial laws against serious investments preventing access to global funds. Nevertheless, we have successfully operating national brands in all four corners of the country, in infancy stages. Despite the bumpy terrain, there are players like Future Group, Shoppers Stop, Landmark, Westside and many more who successfully came out of even the global meltdown, facing fierce competition, with high penetration of 11 million outlets across the country. Moreover, post recession, most modern retailers are wiser, cautious and more mature and the vendors have also learnt to align there cost and supply chains laong with retailers’ business modules From here, Indian retail will take a higher growth trajectory.

2. Given India’s leading business houses, with visionary leadership, such as Reliance (entertainment & retail), Tata, Birl, Bharti, and RPG whom investors in t his country trused time and again and who rarely let down the business stake holders – it would be naïve to think that all of them would go wrong in retail as not only have they already invested in this business but are also putting in more for future growth.

3. From the earlier developer-driven market to a completely retailer-driven scenario of the last one year, some semblance is now reached where both segments of the business are constructing deals which are not tilted in any one party’s favour. This will  not only rebuild the confidence of quality retail real estate constructions so as to not halt new projects, but also provide retailers with good properties to choose from and realistic occupancy cost providing more funds for future expansion and consolidation. Over the last few years, revenue sharing experience in all regions across various retail formats also provided a spectrum of revenue share modules to choose from, rather than just working on guestimates favoring only one-half of both sides.

This article was published in ‘Shopping Center News Jan-Feb 2010 issue. 

1. Commercial

India in the post liberalization period has witnessed rapid economic development. This has initiated the growth of the real estate market in the country. The high demand for office spaces has led to the construction of high-end tech parks all across. In fact, for the past 5 years, the commercial real estate has picked up significantly and now has transformed architecture to major extent.

Some highlights of commercial real estate are:

• India enjoys a competitive edge in commercial real estate, due to vast pool of intellectual capital & cost effectiveness. The 496.4 million work force of India makes a great potential for real estate investments.
• The real estate investment has indeed good future prospects as the sector has a growth of 30% per annum as well as a 30% average rate of return.
• According to the latest investment, there would be an increase of about $14 billion to $102 billion revenue in the next 10 years. Even though the NRI section has not even tapped 20% of the market, they still find investment in India ensures returns that go more than expected profit.
• Much of the growth of the commercial real estate sector is initiated by the government of India. Due to the relaxation of rules for FDI investments and Tax incentives for NRIs, the inflow of foreign capital has been encouraged to great extent. In fact, in India, the global investors can certainly look out for 25% ROI.
• Another very important reason behind the growth of the commercial sector is the organized retail. The shift in the pattern of luxury goods along with the increase in the purchasing of the consumers have led to the big ventures in the real estate. For example, the RPG Spencer's has huge presence in south India. Others include FoodWorld, MusicWorld and Health and Glow and majors like Birlas, Tatas and Reliance.
• The urban concept of entertainment, fun and leisure has also undergone major transformation. Structures like multiplexes and 5 star hotels are now spotted in all cities of India.
• Commercial real estate is the engine that drives the other real estate values because every new office complex gives boost to residential and retail real estate. For instance, in Gurgaon, DLF is finishing one building on a million square feet, another building across the street covering 1.2 million square feet. Both these commercial complexes may well house 20,000 to 23,000 high-salaried employees. And if that’s the case, they need a place to stay there and spend a part of their hard-earned money.

India has turned to be a highly popular destination for investments as its commercial real estate itself yields more than the global real estate.

* sponsored by EWDL.

2. Food & Beverages

Market size & trend: The food retail industry, currently at US$ 70 billion is predicted to grow more than double to US$ 150 billion by 2025.Indian fast food market is growing at an annual rate of 25-30 per cent. With the evolution of innovative food processing capacity and the emergence of organized retail, change in consumption patterns along with fast changing demographics and habits is fueling the next growth trajectory for the food industry in India.

News from the industry:

Yum! Restaurants India, the operator of the Pizza Hut , KFC and Taco Bell restaurant chains, plans to invest US$ 100 million to make its outlet count 1,000 by 2015. Nirula's to open 50 new outlets to expand its presence across the country. Nirula's is shifting its focus to tier II cities such as Patna, Baroda, Pune and Udaipur, among others. 

Subway has taken its store count in India to 200. Company’s goal is to have 530 stores by 2015.Jubilant FoodWorks, which runs restaurant chain Domino's Pizza in India, has announced the signing of a master franchisee agreement with Dunkin’ Donuts. The first outlet will open early next year.(Area- 750-800 sq.ft). The Lavazza Company has announced a plan to set up a unit at Sri City in Andhra Pradesh India becomes the second largest market after Italy within five years.

California Pizza Kitchen doubles presence in Mumbai as it has opened its second restaurant in India. Plans to open 15 new CPK outlets in India over the next five years.(Area-4,000 sq.ft,190 people).

Facts about Food Court:

• Food courts generate 10-15% of a mall’s revenues, on a minimum guarantee plus revenue-share model.
• A 300 sq ft restaurant will cost about Rs 50 lakh to set up
• 8-10% of the total mall area is set aside for a food court.
• Malls give advisory to food court outlets on menu, price points (you don’t see two outlets with same kind of food being served
• Customers take @ Food Court:
• One point billing system where you don't need to shell out change at every counter.
• Awesome Food and reasonable Rates.
• Good quality and service.
• Feedback & Online rating system.
• Name of food court will help in advertise & to maintain a relationship. 

* sponsored by EWDL.

3. Hotel Industry
 

The Indian hotel industry is at Rs.131 billion in 2010. Over the past few years, the hotel industry has witnessed a shift in the product mix towards the budget and mid market hotels. Renowned hotel companies have launched brands (eg. Ginger by IHCL) catering to the budget and mid-market customers, who were thus far being served by the unorganized sector.

Growth Rate

The Indian hotel industry is looking very good because the kind of growth expected over the next couple of years or more is to the tune of 15-20%.

Union Budget Impact

The levy of 5 per cent service tax on room accommodation and 3 per cent service tax on restaurants will negatively impact players. Competition is intense in the current operating environment; hence, the ability of hotel players to pass on levy of service tax by way of higher charges is limited and the service tax can be passed on to the consumers.

Recent News

Jubilant FoodWorks. plans to diversify into new areas, including operating hotels and other non-food segments such as garments and fashion accessories.

Holiday Inn Express brand to be launched in India soon

InterContinental Hotels Group(IHG) will be launching the Holiday Inn Express brand soon. It has already inked a series of management pacts with the New Delhi-based Developer, Amrapali Group for operating 'Express' branded hotels in the country.

Carlson Set to Open 19 New Hotels in India in 2011

Carlson, a privately held, global hospitality and travel company, has announced its plans to open 19 additional hotels in India by the end of 2011 across its four brands: Radisson, Country Inns & Suites by Carlson (SM), Park Inn and Park Plaza. This was announced by Hubert Joly, Carlson president and chief executive officer, at the Hotel Investment Forum India (HIFI) in Mumbai.

* sponsored by EWDL.

 

4. Residential

Industry Details:

India of today can be acknowledged as the one of the fastest growing economy in the world and in this current economic status, Residential Real Estate has emerged as one of the most appealing investment areas for domestic as well as foreign investors, growing at a rate of 30-35% per annum. And this high growth curve owes some credit to a booming economy and liberalized FDI. The Government of India in March 2005 amended existing norms to allow 100 per cent FDI in the construction business. The major residential property developers in India are DLF, Omaxe, Ansal Properties, Jaypee group, etc. and huge investments are seen from new players like Reliance, Tata, Sahara, EWDL and Godrej.

Current Trends:

According to a report released in October 2010 by Cushman & Wakefield, about 4.25mn units of residential property will be required to meet demand over 2010-2014. Residential property has seen increasing demand over Q210 and Q310. However, supply has been relatively low because of reduced construction activity during 2009-2010. Consequently, demand is expected to be three times the supply in 2010-2014.

Real estate companies are trying to cash in on the demand for residential space in Tier-II and Tier-III cities. Most of them have ambitious projects in this financial year.  Thus, huge investments are being made in cities like Allahabad, Patiala, Chandigarh, Indore, Kochi, Lucknow and many more.

News Updates:

• Real Estate Bill Being Redrafted: Minister of Housing and Urban Poverty Alleviation Ms Kumari Selja said in the Rajya Sabha that the Real Estate (Regulation of Development) Bill is still being deliberated
• DDA Plans to Build over 20,850 Houses In The Future: The Delhi Development Authority is mulling constructing over 20,850 houses and flats in the coming years, mostly in south and north-west Delhi.
• I T Department Keeping an Eye on Sources of Real Estate Funding : Suspecting the use of black money to finance deals in India’s booming real estate sector, the Income Tax Department is keeping close eye on the sources of funding for developers’ beneficial projects.

Godrej Group's real estate company, Godrej Properties and Frontier Home Developers, has launched a residential project in Gurgaon.

* sponsored by EWDL.