Indian retail realty prices cooling, says Reliance

MUMBAI (Reuters) - Indian retail real estate prices are softening and availability is rising as high interest rates crimp access to funds, slowing demand and forcing builders to sell, a senior Reliance Retail official said on Tuesday.

Retail firms are scaling back their expansion plans, and builders who had planned to hold on to properties, are selling space to tide over the cash crunch, Bijou Kurien, chief executive of Reliance Retail's Lifestyle unit, told Reuters.

"Finding the right deal was more of a challenge six months back. Now there is some sense in the rate and a willingness to talk," he said." I think real estate prices will continue to soften for the next 3-6 months."

Reliance Retail is a unit of India's most valuable firm Reliance Industries.

Raising funds in India has become difficult, with the main share index down a quarter in 2008 depressing share issues, while the central bank has raised its key lending rate to the highest in seven years to rein in inflation.

"Retail firms, which were riding a general boom, have been set back with the overall market generally looking dim," Kurien said.

The Reserve Bank of India (RBI) expects the economy to grow about 8 percent in the fiscal year to the end of March, slowing from 9 percent or more over the past three years. However, independent economists see 2008/09 growth at between 7-7.5 percent.

Still global retailers are betting on India, the world's second most populous country, with Tesco on Tuesday announcing plans to set up a wholesale cash-and-carry business and a deal to help conglomerate Tata group grow its hypermarket business.

Tesco joins Wal-Mart, Metro and Shoprite Holdings in setting up ventures in India.