India’s recent announcement of the regulations on foreign direct investment (FDI) into its e-commerce sector could boost commercial property in the country, the consultancy JLL says.
With more investment and companies expected to enter India’s online retail market following the move, which includes permission for 100 per cent FDI into e-commerce marketplaces in India, there could be a surge in demand for commercial property.
“The impact that this development will have on Indian real estate will be significant,” says Anuj Puri, the chairman and country head at JLL India. “In the first place, the new players – like their predecessors – will require large office spaces to house their back-end teams. They will naturally direct this requirement to the country’s top seven cities.”
These cities include New Delhi, Mumbai and Bangalore.
“The second impact will be on the demand for warehousing and logistics real estate,” says Mr Puri. “Unlike the demand for office space, this additional requirement will be spread fairly evenly across Indian cities. E-commerce players need to be able to deliver quickly to their customers, and one of the most important clientele segments for them are in the tier two and tier three cities.
“We will therefore see a significant step-up in demand for warehousing spaces in and around these cities.”
He says that the fact that the new regulations are clamping down on deep discounting could be to the benefit of traditional shops, as well as for e-commerce companies which have run into losses because of price wars.
“This announcement brings brick-and-mortar retailers on a more level playing field and would help to still the outcry over unfair trade practices to an extent.
“Overall, this is positive for the retail industry; more rational behaviour will now prevail in terms of market trade practices, and mounting of losses by most e-commerce companies will be curtailed. Online sales may reduce as deep discounts disappear, although losses will also be capped.”
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