K Raheja Realty has completed over 2000 successful projects, covering over 20 million square feet of development. The organization has a proven track record of successful real estate development and real estate technology. Keeping pace with changing consumer expectations and emerging trends, they have introduced concepts to the market that include self-contained townships, IT parks, and super malls.
The group is headed by the team spearheaded by Sandeep Raheja, who has experience spanning over 25 years in the real estate industry. He heads the organization by running the operations, expansions, and strategy, while also actively engaging in the group’s philanthropic initiatives.
In an exclusive interaction with Images Group, he shares his views on the paradigm shift in the retail real estate industry pre and post COVID-19 era.
Tell us about the paradigm shift in the retail real estate industry lately. How has it changed in the pre and post-pandemic era?
Retail real estate had taken a hit due to the pandemic in the last 12-18 months however, there has been a huge surge in demand, post reopening after the first and second wave. There was a very strong recovery in the 3rd and 4th quarters of 2020-21 and 2021-22. This clearly establishes the fact that there is enough appetite in the market. Many retailers took this as an opportunity to expand further in markets where they were not getting quality spaces earlier.
How has this current state impacted the progress of commercial retail infrastructure (shopping malls) to be precise in India?
Post the first wave, there was a temporary disruption in construction activities. Many projects under development had to take a break due to disruption in the supply of raw materials and lack of resources. There was also a delay in the completion of fit-outs by retailers for a few months. However, post the third quarter of 2021, the activities picked up resulting in the completion of many projects and new launches. There has also been a renewed interest from the developers to enter into new markets especially in Tier II & III cities which had shown a great demand during the pandemic.
How do you analyze these changes and trends going forward?
The industry overall is better equipped to handle the crisis in comparison to the peak of the first wave. Furthermore, restrictions have been eased. Most of the categories have seen an upswing in the last quarter, specifically in the offline space. While customers do have the convenience of shopping online, the experience isn’t the same as shopping in a physical store which is much more stimulating, increases social interaction & physical activity. This has resulted in increased footfalls and visitors are back to the malls.
Consumer shopping behavior is set to change further, as we have been in this pandemic situation for almost two years now. How do you see this challenge from the retail real estate perspective? Going forward, tell us about the impact associated with it?
Consumer behavior is always going to be dynamic and will keep evolving. We have to anticipate and understand the changing sentiments and work in tandem to ensure that the customer gets the best experience. While online shopping continues to pose a challenge to the existence of offline stores, we believe both would continue to co-exist. The bigger challenge for offline stores would be to provide customers with a greater experience and the Wow factor of Retail Shops for them to keep coming back.
For smaller brands with less capital or risk tolerance, what can be a popular choice for them without the risk of a long-term lease or the challenge of sourcing real estate and hiring retail staff?
Shopping malls in general have provided relief to many such brands during difficult times despite having valid agreements. This has helped many such brands to pull through during these trying times. Many franchisees have also got support from the brands to help them sustain themselves. The business model hasn’t really seen a big change except for temporary measures like deferment of payment of deposits and rental, deferment of escalation, etc. in a few cases.
Retail real estate is also capitalizing on a healthy economic outlook, what pace of growth are we looking at for the sector in this coming year?
Like most industries, the real estate sector took a hit during the pandemic but we are certainly witnessing a revival with the curbs decreasing. Additionally, demand is outnumbering the supply side of things which is really heartening to see. A recent survey conducted shows a healthy growth of 8-10 percent over the pre-pre-pandemic period in the next financial year.
Multiple brands have become sensitive to climate change and are taking measures to reduce carbon footprint, how can real estate focus meet this demand of Retail?
The world is going green, from installing Sewage Treatment Plants to Solar Power. Everyone is using retail packaging of biodegradable & recyclable material. Malls are replacing regular lights with LED Lights & also regulate the usage of air conditioning, escalators, elevators during non-peak hours to reduce the carbon footprint.
During the pandemic, multiple brands made their start online. Would we see digital brands gradually find unique ways to build their physical presence, whether through opening a store, hiring a ghost retailer, or partnering with a department store?
One of the major challenges of migrating from online to offline is the ability to improve customer engagement, brand presence, brand credibility and also bridge the virtual gap between the offline-online experience. We have brands at our malls like Nykaa, Lens Kraft, Caratlane, Bluestone who initially had an only online presence but now have multiple physical stores across the country. Salt Attire, another popular online brand, will also be opening a store at malls soon.
With traditional brands, digital commerce is never going to completely outmaneuver its physical counterparts. What innovations & ideas can we witness with respect to experiential retail which shall not only focus on shopping but also on rendering an engaging experience to the visitors?
The scope for innovation is limitless and every brand is competing to attract the customer’s attention. One trend that we are certain will take over is the use of AI and VR in physical stores as well to enhance the shopping experience. We have already seen a few brands leverage technology to improve customer experience, and the results have been extremely promising, like AR (Augmented Reality) community events at malls, talent shows, etc.
With the roller coaster ride for Indian retail real estate, what are the strategies with respect to real estate one can take to cope, mitigate, and quickly recover from an impending crisis in 2022?
Strict SOPs as mandated by the government have established trust with the consumers. They have seen that malls are one of the safest places to visit due to measures like sanitization of premises on daily basis to temperature check, allowing only doubly vaccinated staff, enforcing the rule of mandatory wearing of masks, safe air-conditioning, etc being followed and customers very strictly. We are also putting a lot of focus on digital marketing and promotion of the mall and working on an Omnichannel strategy to further improve the revenues of the brand. There also has been a strategy in place to get new brands to keep freshness. F&B has been upgraded and capital investments have been made to improve the look and feel of the mall.
The major setbacks we witness in retail real estate are the ticket size and the dearth of information regarding this asset class. What are the inflation protection strategies that can protect low-risk players?
Retail real estate is very capital intensive and ROI is much longer compared to many other asset classes. Higher capital costs make it difficult for developers to enter into this segment. Commercial real estate is also not really easy to manage. It requires regular upgrades, experienced manpower, and constant focus to give the property a new look. Keeping a low Debt component is important.
Sustainable Real Estate has gained momentum, would the approach of restoring old real estate help the concept develop pace in 2022?
Redeveloping old real estate for high street retail is very possible and sustainable, however, malls require specified planning, safety standards & management of large traffic. This too can be achieved by re-development with more environmentally sustainable techniques.
Omnichannelisation of the malls was the biggest breakthrough of the pandemic for the real estate industry. Your views on this transformation.
Omnichannelisation in shopping malls is a tad bit different today from the original concept. As malls are the epicenter of so many segments associated with both traditional and modern retail, everything which is related to interactive consumer engagement comes under this concept. Today, customers tend to be looking for information in the physical store and at the same time are fed additional information on their mobile devices on deals and offers. For such connected consumers, a mall taking this initiative will be a big bonus, leading to an organized, convenient medium of focused shopping.
Omnichannel malls which work to send mobile updates on movies, book tickets via the mall app, including offers and table booking in restaurants, information on new rides in gaming zones and available parking space will ensure that consumers with families visit the mall again and again.
Where do you see the Indian retail real estate industry in three years from now on the parameters of growth and vision?
Touch & feel cannot be replaced by virtual buying, as it has become more sentimental and trendier. In next 3 years retail real estate will grow steadily and better, as post-pandemic more people spend time at the shopping centers, as it is a getaway from their regular routine and homes and is a changeover in terms that everyone gets to spend time in safer environments with their family and friends at shopping centers, as it provides an environment which is much safer and all facilities under one roof.
As the industry sees the growth the same, we are expecting to achieve more shopping centers under the umbrella of K Raheja Realty group with Infiniti Malls across cities in India.