Retail space: tier-2,3 cities draw investment

Clock $6.2 billion between 2006 and 2017 as against $1.3 billion in Tier-1 metros

The retail sector in Tier-2 and Tier-3 cities has witnessed a much higher investment of $6.2 billion between 2006 and 2017, as against $1.3 billion of the same in Tier-1 metro cities during the same period, according to a CII-JLL report.

Factors including lack of space in retail malls in metro cities, increasing lease rentals in metro malls, and high land prices in Tier-1 cities have made it difficult for retailers to own real estate in metros, it said.

Deterring factors

These factors, the report added, had become a deterrent for expansion and growth of malls in big cities. The report said various global and local brands plan their expansion in Tier 2 cities due to factors like international airport connectivity and rising levels of disposable income. The report identified 20 cities, including Tier-2 cities such as Lucknow, Jaipur, Chandigarh, Kochi, Patna, Bhubaneshwar, Indore and Nagpur among the leading cities, as the next retail destinations in the country.

Releasing the report, Commerce and Industry Minister Suresh Prabhu said, “Retail business must take into account the social issues. The organised retail should be done in a manner that it does not affect the social challenges. They should create more employment, should not displace the retailer who already are in business for years.”

“There is a need to understand complementarity between the so called organised retail and large-scale retailers working in India from a long time... They must grow hand in hand, without creating conflict,” he added.

Mr. Prabhu said the organised retail armed with huge capital and unorganised retail should create a win-win situation for the growth of the sector. Citing the huge wastage of fruits and vegetables due insufficient cold storage facilities, he asked the retail industry to consider setting up a proper supply chain. The Minister said that the government was considering a proposal to set up a hub for exports of vegetables and fruits, adding that his ministry was in discussions with the Civil Aviation ministry in this regard.

On the initiatives for the retail sector, he said, “We are trying to adopt a policy which will create an ecosystem where retail will not only reach our masses, but also create opportunity for jobs and contribute to the economy.” The Minister said there was a need to provide poor craftsmen with an e-commerce platform.

The e-commerce sector had the potential to create millions of jobs and that the government was keen to ensure mobile connectivity across the country in this regard, Mr. Prabhu said.