High rentals squeezing luxury sector in India

Luxury brands in malls like Emporio and UB City want a cut in rentals. These include high end labels like Armani Jeans, Jimmy Choo, Canali and Giorgio Armani. Demonetisation has deeply hurt luxury retailers as their goods are sold primarily in cash. Sales in the luxury sector have halved since demonetisation.

Luxury rentals in India are already high. Due to limited options, there is a demand-supply mismatch with regards to leasing, which is driving up rentals. The rental structure is similar to a mature market, but the demand isn’t. Rent should ideally be eight to ten per cent of turnover, but in India it currently stands around 16 to 20 per cent.

The luxury sector has reeling under various anti-black measures, such as the imposition of a one per cent excise duty on gold and diamond jewelry products. Besides, it has been made mandatory for customers to share their pan for cash transactions of more than Rs 50,000. Also there has been a one per cent luxury tax on goods worth more than Rs 2 lakh, which has led to a drop in sales of several luxury goods.