RESEARCH May 2011 E&r @ GLANCE Economy & Realty Knight Frank Economic Outlook Economic Zones (SEZs) have been a major During 2010-11, manufactured goods were contributor to this growth with exports from leading in terms of exports followed by The growth of an economy is primarily driven SEZs reaching INR 3,158 bn in 2010-11 as minerals and IT/ITeS. Strong global demand by three major segments namely private against INR 2,207 bn in the previous year for automobiles, textiles and engineering consumption expenditure, government thus recording a growth of 43% in the current goods helped India post 33% growth in consumption expenditure and exports. fiscal. export of manufactured goods. Export of Recession in the global economy during 2008 IT/ITeS services has also witnessed a India's export to all its major trading partners and 2009 led to slowdown in India’s private considerable improvement in 2010-11 as has gone up significantly in 2010-11 with consumption expenditure and exports. demand from developed countries remained exports to China growing at a whopping 77%. Realizing the threat to domestic growth story, robust. Such strong export numbers have led Export to other trading partners such as USA the government of India had stepped in and the Ministry for Commerce and Industry to and Europe have also grown in double digits increased government spending during revise its export target to more than US$500 during 2010-11 showing the strong pace of 2008-09 which eventually helped in bn in the next 3 years. maintaining the GDP growth rate at 6.7% in recovery in foreign trade with these countries. India’s Export Growth by Sector 40 that year. USA, Europe and China together account for 40% of India's total export and the economic 30 Exports took a major hit in 2008 with recovery in these countries has helped India 20 slowdown in global trade due to the in improving its export in 2010-11. t n economic meltdown in the leading countries e c 10 r India's export to all e of the world. However, the economic recovery P witnessed by developed countries since early its major trading 0 2010 have helped the global trade market to partners has gone -10 flourish once again with exports from India -20 reaching new highs in 2010-11. The latest up significantly in s s s d d l e d e n a t r I o r a u / e o t s forecast by International Monetary Fund (IMF) T n g c 2010-11 with exports I e i r a f M O in April 2011 suggests that the world GDP u n to China growing a growth will remain in the range of 4.4-4.5% M 2009-10 2010-11 Source: Centre for Monitoring Indian Economy, NASSCOM for the next two years with countries like India at a whopping 77% and China continuing to lead in terms of GDP Strong global India’s Export Growth by Country growth going forward. 80 demand for Real GDP Growth (%) Country 2010 2011 2012 60 automobiles, USA 2.8 2.8 2.9 textiles and 40 t UK 1.3 1.7 2.3 n e c engineering goods r e Euro Area 1.7 1.6 1.8 P 20 helped India post China 10.3 9.6 9.5 World 5 4.4 4.5 0 33% growth in Source: World Economic Outlook, April 2011, IMF export of -20 a a o K A India has been a major beneficiary of the r e n S U i r u U manufactured h E A recovery in global trade market with exports C 2009-10 2010-11 goods growing by more than 37% in 2010-11. Special Source: Centre for Monitoring Indian Economy India Research KnightFrank.co.in This report is published for general information only. Although high standards have been used in the Samantak Das National Head - Research preparation of the information, analysis, views and projections presented in this report, no legal +91 (022) 6745 0101 responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the [email protected] view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank Research. ma y 2011 E&R @ GLANCE Along with exports, growth in private As of today there are just 4 malls operational predominantly concentrated around the CBD consumption expenditure also witnessed in the city, which translates to almost and off-CBD locations, future growth is being improvement after 2009-10 and grew at a rate 2 mn.sq.ft. of retail space. However, this witnessed towards the suburban and of more than 7% in the last two years. scenario is expected to change in the next peripheral locations. The locations with a Although the recent hikes in policy rates by few years primarily due to the influx of the high potential of development continue to be Reserve Bank of India (RBI) has raised serious IT/ITES sector, with a majority of the in the south, predominantly towards concerns about the economic growth slowing proposed malls being located in proximity to locations like the OMR, Velachery and GST down, robust export and heavy spending by the IT corridor, known as Old Mahabalipuram Road. government on infrastructure will help India Road (OMR) or Rajiv Gandhi Salai. in sustaining GDP growth above 8% in the Supply and development With the advent of the IT/ITES sector, the coming years. The retail development in Chennai which had often-perceived conservative mindset of the stagnated over the past couple of years is Strong economic growth will positively city is witnessing a remarkable change. The expected to witness steady growth in the impact the demand for office and industrial propensity towards consumption has future. Over the last year only two malls came space in India in the coming quarters. States increased, primarily driven by the increase in up in the city, viz. the 0.8 mn.sq.ft. Express like Maharashtra, Gujarat and Tamil Nadu are the average disposable income of the Avenue, located at Mount Road and the already witnessing increased demand for consumer. This has led to the growth of high- 0.4 mn.sq.ft. Citi Centre mall at R. K. Salai. land from the manufacturing sector. Similarly, end retail units and the overall growth of the This scenario is soon to change with around demand for office space in cities like organised retail sector. The current incidence 22 malls planned to enter the market in the Bengaluru, Pune, National Capital Region of the highstreet format which drives retail in next 2-3 years in various parts of the city. (NCR) and Mumbai is also expected to remain the city is expected to change to a mall- Currently, most of the malls are either under- robust backed by high growth in the IT/ITeS oriented culture in the forthcoming years. construction or in planning stages in the city. sector. Table 1. Retail market classification Approximately 9.4 mn.sq.ft. of new retail Micro-market Location space would be added to the Chennai real Central Business Cathedral Road, RK Chennai Retail Market estate between 2011 and 2013. District Salai, Mount Road, Overview T Nagar, Approximately 9.4 Nungambakkam Chennai is one of the foremost cities of the Suburban Business Nandanam, mn.sq.ft. of new country where the concept of organised District Poonamallee High retail space would retailing was incepted. A pioneer in Road, Egmore, promoting the mall culture in the country with Kilpauk, Anna Nagar, be added to the the opening of Spencer Plaza in the early Adayar, Guindy Chennai real estate 90's,Chennai, however, has not seen the Peripheral Micro Old Mahabalipuram emergence of many new malls in the past Markets Road (OMR), GST Road between 2011 and 2013. decade. The city has been a conservative The development pattern in a city also plays Distribution of upcoming supply (2011-2013) market on the subject of retail; people in the an important role in understanding its city are more value-oriented as compared to growth. Chennai has been growing laterally the other metropolitan cities. This consumer over the years with traditional retail markets behaviour is reflected in the retail growth of like Parry's being gradually replaced by the city with the highstreet format highstreet locations of Nungambakkam and dominating over the others. T-Nagar. This reflects the demographic relocation patterns being witnessed in the As of today there city. The second and third generation are just 4 malls residents of Chennai have shifted bases operational in the towards locations like Anna Nagar, Besant Nagar and Adayar, leading to a city, which corresponding shift in retail. Central - 15% translates to North - 8% Traditional residential pockets like Mylapore South - 66% almost 2 mn.sq.ft. and Gopalapuram have also been witness to West - 15% Source: Knight Frank Research of retail space a similar demographic shift. Although existing retail developments are India Research KnightFrank.co.in This report is published for general information only. Although high standards have been used in the Samantak Das National Head - Research preparation of the information, analysis, views and projections presented in this report, no legal +91 (022) 6745 0101 responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document.