Ikea, the world’s biggest furniture retailer, will be setting up smaller stores in India, thanks  to high land prices and strict building rules in the country, according to the company.

Typically, an Ikea store spreads over 350,000 square feet on a land of 10-15 acres.

It has a two-level building with parking space for at least 1,500 vehicles, either in front of the building or under the building, depending on the land prices. The stores are always located along a highway, near a public transport preferably a metro line, it said.  Currently, there are 315 Ikea Group stores in 27 countries.

The Swedish company’s core business is selling higher volumes, to a bigger customer base, at low prices. To make this possible, it sets up large stores and cuts out on unnecessary costs in the supply chain.

In India, however, the company has approached real-estate developers to build stores spanning 1 lakh square feet to 2 lakh square feet, according to people directly involved in the discussions.

The move comes as the Swedish company is moving ahead with its plans to build 25 stores with the first store expected to come up in Hyderabad.

The company has got an approval to invest Rs 10,500 crore for its India expansion.

“Ikea wants three times the FSI,” one of the persons involved told FE.

“This will increase the cost of construction.”  Even if Ikea is ready to pay the extra money for development and construction of a store, the major constraint is the building laws, he said.

As a thumb-rule, India’s building laws allow anywhere between 1.2 to 1.5 times for large stores to be constructed on a piece of land, and this is much lesser for plots near the highways. The calculation, in technical parlance is called the Floor Space Index (FSI), the total allowed area for construction in a given piece of land.

The FSI ratio is different for land near the highways to a smaller street in cities and towns. For a larger store, commercial buildings also need to provide space for public utilities such as car parking.

“In India, these things vary from state to state,” says Harminder Sahni, managing director of Wazir Advisors, a research and consulting  firm. “I don’t think Ikea will get a special privilege.”

Impacted by the stringent construction rules and high land prices, Ikea has decided to cut down on the size of its stores in the country. But, the company did not specify how big or small the stores in India would be.

“In India the high land prices and low possible ground coverage force us to look for smaller plots and work on minimizing our store foot print,” the company said in a statement. “This means some alternatives like putting the parking under the building.”