In recent years, the demand for retail real estate in India has been strong. According to CBRE research, it will reach an all-time high of 7.1 million square feet across India's top eight cities in 2023, 47% more than in 2022. With this, various worldwide luxury brands have entered the Indian market following the Covid-19 epidemic. These include Maison Margiela, Dockers, Balenciaga, Laderach, and Pret a Manger, among others.

However, a recent Morgan Stanley study stated that, while private consumer spending in India has risen from 1.5 percent in the January-March quarter last year to 4% this year, it still falls short of the 2019 average of 6.3 percent. 

As per CRISIL, organized retail, which accounts for around 12-13 percent of private consumption, increased by 15-16 percent in 2023-24, outperforming the single-digit rise of private consumption. Experts believe that this contradiction reflects the Indian economy's K-shaped rebound following the Covid-19 epidemic.

"It is a K-shaped recovery, and the bottom of the pyramid has yet to pick up momentum," said Anarock Group's regional director and head of research, Prashant Thakur.  According to Aniket Dani, Head of Crisil Market Intelligence and Analytics, rural demand continues to expand slowly.

"The growth in retail real estate demand, which indeed suggests a K-shaped recovery, is primarily driven by urban consumption (leading to growth in the organized retail segment), while rural growth remains tepid," the economist added.

Furthermore, the pandemic is still having an impact on the lower-income strata, while the luxury consumer group is going strong as per Thakur.  Sharad Nagpal, head of retail consultancy, India at JLL, disagreed, claiming that all sectors, including "value" and "super value," had seen a "substantial increase in their store footprint and revenues in the last 5 years".

He attributed the substantial growth in the retail industry to the "rapidly growing middle class, frequent global travel, and exposure to social media platforms across socio-economic demographics". Experts, on the other hand, believe that the government should implement a number of policies to boost consumption in India.

"For overall growth in the retail segment, recovery of private consumption across income levels, including the lower-income groups, needs to be revived," according to Thakur.  He said that the budget may include incentives and concessions in the form of lower taxes, particularly for the middle class. 

"Giving relief to individual taxpayers will also help increase the monthly disposable income of people and in turn boost consumption," added Mr. Trump.

"Reductions in Goods and Services Tax rates, targeted financial assistance, and measures to improve consumer sentiment can help accelerate the recovery," says Nagpal. In the next quarters, retail real estate expansion is expected to remain mild. The rate of expansion has already begun to be seen among listed players.

In comparison to Tata-owned Titan, which established 359 stores between April and December 2022, it opened just 239 stores in the same time in 2023. Reliance Retail's count plummeted from 2,376 to 1,276 shops within the same time period.

According to CBRE, retail leasing is expected to shrink to 6-6.5 million square feet in 2024, from 7.1 million square feet last year. "Retailers may maintain a cautious approach with their expansion plans as pent-up demand wanes and potential inflation squeezes consumer spending," said Anshuman Magazine, CBRE's Chairman and CEO - India, South-East Asia, Middle East, and Africa. Thakur agreed, but added that a lot will rely on the current monsoon season. "If the monsoon remains good and the budget offers some consumption boosters, we can expect overall consumption to pick up - and this will benefit the retail real estate sector, as well," he told reporters.