Foreign retailers to Extend India Entry, JLL

Jones Lang LaSalle reported that the foreign retailers are likely to extend their decision to set up stores in India, for one or two years.

Jones Lang LaSalle India, in its quarterly report Asia Pacific Property Digest, stated that the foreign retailers are likely to extend their decision to enter India by starting up various stores in India. According to the report, India will have to wait one or two more years for their entrance in to the subcontinent.

The developers’ expectations to fill the vacant malls have to be put on a pause for a couple of years more. The foreign retailers have now decided to enter India after the union election which is to be taken place next year.

JLL India says that the foreign retailers are cautious to enter India due to the higher realty cost. The upcoming election is another factor which forces them to postpone their entry in the Indian soil.

India has higher rentals that account for around 9 to 15 percent of the total revenue of the retailers. The rentals and the realty cost in India are far higher than the global average that falls between 4 to 10 percent. This prevents the foreign retailers who are highly cost-sensitive.

However this is not the sole reason. They are also conscious of the upcoming elections in India. India is to undergo union elections in 2014. This also makes them slightly reluctant as they are not sure of the next government’s policy.

The current government has accepted more foreign direct investment in retail, giving veto power to the states to take the final decision on the FDI bill. The central government has left the final decision on to the state government.

Given the veto power, some of the states have already banned the foreign retailers from entering their states while others have welcomed them. Some fo the foreign retailers like Wal-Mart has conveyed their anxiety over the veto power of the states, to the central government.