The development of shopping malls in India has been on a steady rise since the last couple of decades. This is owing primarily to the increasing disposable incomes, lifestyle changes, evolving trends, and technological advancements
According to a report by CARE Ratings, the Indian retail industry is amongst the fastest growing in the world. It is further expected to reach up to USD 1,150 billion by 2021. Indian Malls, at present, provide a variety of experiences. These include food joints for please your appetite, movie theatres for your recreational needs, and gaming arcades to satiate the sportsperson in you. All of this, coupled with a unique environment, makes the malls a fun-filled destination for today’s consumers.
The key to their survival is tapping into rapidly changing consumer preferences and the flexibility to realign accordingly. While the large real estate developers have mastered the art of mall development and management, the race has ended for small players even before the countdown began. The developers are increasingly becoming conscious of this. The fact can be highlighted from cases such as the re-launch of one of the oldest malls in North India-Delhi’s Ansal Plaza. The mall was renovated and repositioned to suit the needs of today’s consumers. Another example is the re-launch of Chanakya cinema by DLF Emporio, as the mall catered primarily to the luxury category erstwhile.
While the majority of Tier 1 cities in India have a flourishing mall culture, smaller cities, especially the Tier 2 and 3 markets, hold immense scope for their development. Some of them do have big malls, and the ones that are functioning well include World Trade Park Mall in Jaipur and Z Square Mall in Kanpur. However, there is still a massive gap that needs to be bridged.
The development of malls in smaller cities suffer due to factors such as lack of planned zoning, as well as design flaws, infrastructural hurdles, clearances, shortage of skilled labours, and inadequate funds. With this, several properties are available on sale in these cities due to poor post-launch performance or financial stress.
The experienced developers are increasingly stepping forward to the rescue of these structures. They are diverting their efforts to Tier 2 and 3 cities that show promising potential. With land prices peaking in metro cities, the scope of acquiring land or buying an existing property from the struggling developers is proving to be a more viable option.
Additionally, people in smaller cities are in search of spaces that have more organised retail. Needless to say, malls can cater to this requirement along with adding to the overall experience for the masses, infrastructure and ambience. Moreover, this poses as a great option for the retailers too, as the rental values and operating costs are 30-40 percent lower in these areas as compared to a mall in a metro city.
As per recent reports, more than 65 million sq ft of new mall spaces are likely to open up in India by 2022, of which 72 percent will be in Tier 1 cities, and 28 percent will be across tier 2 and 3 cities. In such a scenario, the entry of reputed players when combined with the expertise of local partners will go a long way in ensuring that the development of these structures has a longstanding impact.
These projects will be backed by the synergy that brings in-depth knowledge of the market from an insider’s perspective as well as the proven track record and financial backing that the bigger players bring with them. The development of malls in smaller cities is indeed one of the biggest business opportunities in Indian real estate today. With changing consumer preferences, the retailers are waiting to enter the market, and the Government initiatives are opening up new avenues. How well the players utilise them to lay the foundation of projects will determine whether they can adapt, accommodate and eventually thrive in the market.