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Why Business Enterprises Should Invest in Retail Real Estate in India

With a population of 1.4 billion, India is one of the fastest-growing retail markets in the world. At current the.....

February 2, 2025
Posted by: Admin
Categories: Retail Sector

Why Business Enterprises Should Invest in Retail Real Estate in India

With a population of 1.4 billion, India is one of the fastest-growing retail markets in the world. At current the country is 5th largest retail space around the globe. India's retail industry accounts for 10% of the GDP and 8% of the employment as it is one of the major pillars of the economy. The retail market of India is projected to reach USD 2 trillion by 2032. The growth is driven by urbanization, increased spending power, rising middle class, changing consumer preferences, and the evolving e-commerce space. Conducting market research for retail real estate in India is crucial to understanding these dynamics and identifying lucrative opportunities for investment in this sector.

In 2023, unsecured loans in the retail sector reached USD 144.5 billion which reflects a significant increase in consumer borrowing. This increased financial capacity of consumers allows them to spend more on branded goods like apparel, cosmetics, electronics, food & beverages, etc. leading to a boom in the retail and shopping segment in India. Interestingly, the retail boom is not just limited to metros in India but also proliferating rapidly in the tier-2 cities as well.

Why Modern Retail is Replacing Traditional Kirana Shops & Stores:

For decades the Indian retail segment has been dominated by local Kirana stores & neighborhood stores with over 13 million stores available in the country. In 2020, the unorganized segment accounted for 88% of the total retail industry playing a crucial role in the country’s economic scenario. However, with the emergence of online shopping and modern retail stores (malls, supermarkets & hypermarkets) the industry is undergoing a remarkable transformation.

The modern retail offers several advantages in comparison to Kirana stores. With changing preferences, consumers seek for wider product selection and competitive pricing which is very well delivered by modern retail, including supermarkets, hypermarkets, and e-commerce platforms. Additionally, modern retail provides features like online ordering & delivery services, UPI/online payments, virtual assistance, discounts & cashback, etc. resulting in greater convenience to customers. Supermarkets and Hypermarkets create a more organized and pleasant shopping experience attracting the urban population looking for a sophisticated environment. As a result, the share of Kirana stores reduced to 70% in 2023. To gain deeper insights into this evolving landscape, market research for retail real estate in India is essential for businesses and investors looking to tap into this growing industry.

The market encompasses major players like Reliance Fresh, DMart, Star Bazaar, and Big Bazaar expanding rapidly. In 2023, Reliance Retail had over 18,000 stores in 7,000 towns, whereas Big Bazaar rebranded as Smart Bazaar had over 400 stores in more than 200 cities. It is one of the oldest hypermarket chains in the country. DMart has also been expanding its presence across 12 states with 381 stores at current. The brand generated a revenue of USD 618 million in 2024. Conducting a feasibility study for retail ventures is crucial to understanding market expansion and sustainability.

Rise of Malls and Supermarkets:

India’s retail landscape is undergoing a robust transformation driven by the rise of malls and supermarkets. Between 2023 and 2025, there will be 60 new malls adding 23.25 million sq. ft. of prime retail space. Tier 1 cities like Delhi-NCR, Mumbai, and Bengaluru are witnessing a significant rise in Grade A mall development. These cities are projected to add 5-6 million sq. ft. of retail space in the industry.

High street retail is also witnessing a substantial surge as the leasing activity increases to 3.82 million sq. ft. in 2023. Tier 1 cities were at the forefront of the retail real estate market, accounting for 75% of the total leasable area across 263 shopping centers. The most demanded sectors were fashion, athleisure, and jewellery. The demand is further boosted by changing consumer preferences looking out for a blend of shopping, dining, and entertainment at a single stop.

Tier 1 cities offer a wide range of domestic brands, international brands, and luxury brands. These places have a vibrant ambiance and includes clothing stores, food courts, electronics, home goods, multiplexes, etc. Tier 2 and Tier 3 cities are also witnessing growth in the segment driven by increasing urbanization, rising disposable incomes, and a growing demand for premium shopping experiences. A well-executed feasibility study for retail ventures can help businesses capitalize on this emerging growth by assessing demand, location suitability, and investment potential.

Major malls in India

DLF Mall of India, is one of the largest in the country spread across 2 million sq. ft., and is a popular destination for shopping, dining, and entertainment.
Lullu International Mall situated in Kochi is a retail giant accommodating with more than 300 outlets.
Ambience Mall in Gurugram is known for its wide range of retail options with hundreds of brands including luxury segments. It also has entertainment options like ice skating, PVR cinema, Gaming zones, etc.
UB City is a popular mall in Bangalore with a collection of various high-end brands and aesthetic accessories.
Select Citywalk in Delhi accommodates 500 international and domestic brands with 180+ stores. The mall has outlets of brands like H&M, Zara, Dior, Chanel, Emporio Armani.

Modern Retail - Where Shopping Meets Social:

The retail segment of India has been revolutionized as the industry is not just about the procurement of goods, consumers are looking for holistic experiences along with it. Gen Z and millennials are increasingly seeking a combination of ambiance, entertainment, and engagement when they shop. With the changing consumer preferences, retailers are diversifying their spaces with social interactions and immersive experiences. Shopping is now connected with entertainment, dining, and social activities. As a result, malls are evolving into leisure spots with multiple options like cinemas, arcades, indoor theme parks, etc.

Modern retail is also fostering meaningful social interaction. Brands are coming up with unique and customizable ideas to engage customers. For instance, Nike stores often offer workshops, personalized designs, and sneaker festivals for their customers to promote brand loyalty. Other renowned brands like Adidas, Levi’s, Lenskart, and Warby Parker also offer such customizable options. Bookstores also host author talks and seminars for community building. Cafés in India are increasingly providing workspaces and community spaces, catering to the growing demand for social interactions.

Future Outlook of Retail in a Time of E-commerce:

The e-commerce sector has emerged as a dominant force in the Indian retail segment over the last few years. In 2023, India witnessed an impressive daily e-commerce transaction of 6.4 million units, and the numbers reached 12.4 million units on peak days. This highlights the growing interest in digital shopping among consumers. With increasing internet penetration, India’s e-commerce customer base is projected to reach 500 million by 2030. As per media reports, there was a 36.6% year-on-year increase in number of online orders placed in the country.

The e-commerce market of India is projected to reach at USD 350 billion by 2030. The surge in the e-commerce sector is due to the convenience and accessibility for online shoppers. Factors like a wider range of products, competitive pricing, home delivery, and 24/7 purchases have been major driving forces behind the growth in online shopping. Amazon and Flipkart are the market leaders dominating the e-commerce sector of India. Some other brands marking a strong presence are Myntra, Nykaa, FirstCry, BigBasket, and BookMyShow.

Investments and some key trends in the Retail Sector of India:

There were massive digital payments made in India in 2024, as the figures of UPI transactions were valued at a staggering USD 221.6 billion.
Subway is looking to expand its presence in India. They are planning to increase the store count from 850 in 2024 to 1700 by 2030.
Renowned furniture brand, IKEA is set to invest USD 102 million to expand its offerings in India.
The Indian retail segment has attracted an FDI inflow of USD 4.6 billion between 2000 to 2024.
Popular clothing brand, H&M is expanding its product offerings to home décor and accessories which will include plates, bowls, bedding, decorative, etc.

How The India Watch can Help with Feasibility Study Report?

As retail real estate is growing fast in India, increasingly investment houses, funds, HNIs, private developers drawn towards the segment. To such investors, The India Watch can help with custom made feasibility study.

The scope of the feasibility study will include the following: