What limits growth of India's luxury market?

Limited availability of suitable real estate remains a critical constraint.

Several cities in India remain relatively underserved by luxury brands despite promising economic indicators and future market potential, according to Savills.

“These cities lag behind similar counterparts such as Sao Paulo and Mexico City, which rank well in terms of luxury provision relative to market size and wealth, highlighting the potential scope for significant expansion in India going forward,” the report noted.

Despite remaining underserved, recent years have seen a gradual increase in luxury brand openings in India. In 2024, IWC Schaffhausen (LVMH) opened in Mumbai, following Brioni (Kering)'s debut in Delhi late last year.

Economic forecasts indicate strong growth in retail sales across major Indian cities, with Hyderabad expected to lead with an annual growth rate of 8.4% from 2024 to 2029, followed by Delhi at 7% and Mumbai at 6.8%.

Moreover, the launch of Chanakya and Emporio Malls in Delhi in 2017 triggered a wave of luxury openings, though growth slowed temporarily afterward.

The recent opening of Jio World Plaza in 2023 has also reignited competition for retail space, whilst developments like DLF's luxury mall in Gurugram have attracted significant interest from international brands.

However, barriers such as foreign direct investment restrictions and a high Goods and Services Tax (GST) of 18% present challenges for luxury brands seeking to establish independent operations in India.

Many brands are opting for franchise partnerships to navigate these hurdles, leveraging local expertise and distribution networks.

Despite the interest in India's expanding luxury market, limited availability of suitable real estate remains a critical constraint.

“It is a fair assumption that these factors are limiting the Indian luxury market and the lower number of luxury openings identified historically has been a response to these issues rather than being a reflection of weaker appetite,” the report noted.

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Savills

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