Fdi In Retail Is Good News For The Realty Sector

FDI in retail is good news for the realty sector

. It will also create more jobs which in turn will fuel demand for housing apart from retail spaces.

Foreign direct investment (FDI) can now flow into the retail sector. It is naturally expected that FDI in multi-brand retail will open up many doors for the real estate sector too. Further, the recent announcement by the Reserve Bank Of India (RBI) of a strong growth in the services sector is good news too. It will push demand for commercial property.

The decision to allow FDI in the multi-brand retail sector will push the real estate sector as there will be an increased demand for commercial spaces. Also, it is expected to create more jobs. This will propel the demand for residential property as well.

According to analysts, the requirement of residential space is five times that of the commercial space used in a city. As such, if the demand for commercial space remains strong, it will boost the demand for residential real estate too. It will open up immense opportunities for developers in the medium to long terms, as the demand for quality real estate will rise. Large investments by international retailers in real estate for retail store and warehouse spaces are on the cards.

The services sector has been one of the countrys core sectors over the past decade, as its contribution to the GDP has significantly increased from 50 percent in the financial year 1996 to 63 percent in the financial year 2012. In the financial year 2012, when all the other sectors, including industrial and agriculture, performed poorly, at an average of 3.1 percent growth, the services sector recorded a healthy growth rate of 8.5 percent.

More Jobs

The liberalization will translate into generating increased employment opportunities in the country which in turn will enhance the economic growth rate. Increased employment means increased disposable income which in turn increases the demand for housing. The real estate industry will benefit immensely due to the substantial increase in demand for high quality retail spaces. The governments move to allow 51 percent FDI in multibrand retail will attract investments and change the retail landscape. In the medium to long terms, the retail sector, real estate industry and end users will benefit from the move. It will create demand for retail space and boost development of malls in the country.

Prices set to rise

Property prices will firm up in the future. With the arrival of new companies there will be huge demand of retail spaces in cities. This is expected to have a positive impact on the realty sector. The foreign brands will need to set up stores. These stores have to be near consumers. So, the most likely places for such stores will be commercial hubs.

Further, organsation find substantial buying power in smaller towns and cities. So, they will target such smaller town and cities too. Here, the cost of realty as well as man power is lesser as compared to metros like Bangalore.

These stores need thousands of square feet of space. They also need storage space. All this is bound to escalate the price of commercial property.

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by: Imtiaz

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