The modern retail sector is passing through challenging times in the face of inadequate funding, lack of sufficient space for expansion and talent crunch, and growth is expected to dip by 5 per cent this year, say industry officials.

The modern retail sector is estimated to have grown in the region of 25-30 per cent in 2011 but the last two months have been very bad for the industry, Aditya Birla Retail MD & CEO Thomas Varghese said.

"January (the current month) does not look great," Varghese, also Chairman of the CII-National Committee on Retail, told PTI here.

The country’s big retail players are facing challenges in terms of funding, real estate and scarcity of talent. In addition, contrary to expectations, consumer shift to modern retail has not happened at an accelerated pace. "That’s also a challenge from consumption point of view."

"Getting real estate is becoming more and more difficult," he said.

"Funding has become very difficult for real estate developers and land-lords. So, I think we are going to see pretty challenging scenario in terms of real estate availability."

"This year, we (modern retail) will witness slightly lower growth than last year…about five per cent lower (in calendar year 2012). If we are to look at the current trend, we are in a challenging situation and 2012-13 also does not look like a great period as now. It is going to be a period of cautious optimism."