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UPDATE

After a long wait, GAP is finally in India

GAP, the American clothing and accessories giant, will open for business in a posh south Delhi mall on May 30—and with it, finally enter one of the last major international markets where it didn’t have a presence.

But GAP is already a little late to the party because international high street brands like Marks & Spencer and Zara have already made inroads into India’s apparel retail market, which is currently valued at $41 billion (Rs262,400 crore). By 2020, it is expected to grow to about $60 billion (Rs384,000 crore).

That said, GAP has been sourcing from India for decades and then selling its “Made in India” garments on foreign high streets.

So, why did it take so long to finally sell in India? ”We were waiting for the right partner,” Oliver Kaye, business head for GAP India, told Quartz. That partner happens to be Arvind Lifestyle, an old hand in the Indian apparel market with over 1,000 stores across 192 cities. Arvind Lifestyle, a subsidiary of the textile-to-real estate Arvind Group, has brought marquee brands such as Tommy Hilfiger and Calvin Klein to the subcontinent.

And perhaps the wait to stitch a franchise deal with Arvind was a smart move, because GAP’s plan to corner a share of India’s apparel market will involve dealing with one big problem: Quality real estate.

In the next five years, GAP wants to open 40 stores, focusing solely on major cities. And it can’t do that without some serious help from Arvind.

“International players feel that there’s no right real estate in India,” J Suresh, managing director and CEO of Arvind Lifestyle Brands, told Quartz. “But we now have some 20-25 malls that are doing well in India. So the challenge could be getting space in those malls.”

“And we have a huge advantage of real estate leverage than anyone else,” he added. Arvind has a massive distribution network across India’s apparel sector with more than 1.3 million square feet (pdf) of retail space nationwide. In turn, that sort of scale allows Arvind to bargain harder with builders when looking for space to introduce its newer brands.

“The challenge for us is not to get space. The challenge is to vacate someone. We have the influence to vacate people,” Suresh said. ”Even in Select Citywalk (where the first GAP store will open), we have some 10 stores. We get the best locations, and some of the better terms.”

“We go into any mall, and we can underwrite a 100,000 square feet. No mall today in India can survive without an Arvind,” Kulin Lalbhai, executive director of Arvind, told Quartz.

For the large-format stores, real estate is a typical stumbling block in India. “This is essentially because the majority of retail space developed in India to date lags behind global standards, and does not provide the quality, ambience, design, services or post-construction maintenance that global retailers are accustomed to,” a June 2014 report by CBRE Global Research and Consulting explained.

And when space does become available, it doesn’t quite translate into footfalls and sales. Zara, for instance, recorded a 35% decline in profit last year because sales its new stores—other than the two flagship stores in New Delhi and Mumbai—didn’t quite pick up.