India's 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 percent this year, say industry officials.

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

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," he said.