Cashing in on India’s retail sector

By Dr Suvrokamal Dutta

While there is no doubt that investment in Indian retail sector is not for everyone but there are ways for investors to cash in. Theoretically speaking, a budget of between Rs 30-50 lakh buys you into the rampaging retail roller coaster.

If experts are to be believed, malls are the formats that grab all the headlines- and earn the highest ROI- but you can safely forget about getting a piece of the action if you do not have a disposable nest egg of at least a crore to play with. Moreover, it is worthwhile pointing that large chunk of mall developers prefer to lease out rather than sell space within their malls.

“High-street shop space in the city centre is out too, since capital rates in Mumbai’s retail intense localities like Linking Road, Breach Candy, Churchgate and Mahalaxmi range between Rs 25,000-80,000 per square foot,” pointed out Rahil Nandan, retail expert.

Though, when you take into consideration the fact that the space ATMs occupy in flourishing market areas like Linking Road, Colaba Causeway, Bandra and Lower Parel technically qualify as retail space. While ATMs see a plenty of activity in almost any residential or business area, people need ready cash most often in retail-intense areas.

In my opinion, investing in space large enough to warrant the presence of a major bank’s ATM in such a locality is an economical option within the above-stated budget. In general, ATM occupies around 174-250 square feet. Since ATMs are small spaces, they also give rents higher than the average high street store. “Any bank that leases such a space to locate an ATM in will pay the usual interest free security deposit for 6 to 12 months,” pointed out Kadam Ali, noted business journalist based at India.

The pivotal factor here is that this money will earn you interest in the bank in addition to your future rental earnings. Once such a space has been obtained, one can approach major banks with an ATM-specific lease proposal.

In case if one’s option in South Mumbai are limited to 100 square feet or thereabouts, the scope enhances vastly if one considers the suburbs or Tier II/III markets. You may not believe at first but in a budget of Rs 40-50 lakh, one can purchase a retail space of up to 700-1000 square feet there. In my opinion, this can turn out to be extremely lucrative in both the short and long terms, since there is a definite scope for appreciation.

As is the case in any property investment, make sure that the property has a clear title and is free of encumbrances. A lawyer’s services are highly advisable in this regard.