After showing a high growth in 2007-08, retail mall development has virtually come to a standstill as tenants curtailed expansion plans. Developers now find it worthwhile to convert retail space into homes and offices, considering the demand growth in this segment. Demand for homes has grown 40% to 50% in various parts of the country in the last two quarters of the current financial year as builders reduced prices and buyers scouted for second homes in mini metros. Office space demand has been growing around 15% to 20% in the first part of FY 2009-10, according to builders and property consultants.
Delhi-based Raheja Developers, which was in the process of developing 2.5 lakh sq ft retail space in association with the Delhi Development Authority, has decided to convert 2 lakh sq ft land into commercial space.
Only the rest will be used for retail development. Harinder Dhillon, vice-president marketing, Raheja Developers, said, During 2007-08, demand for retail mall development had grown by 50%. However, after the slowdown, retail mall development has been negligible. The firm may also look at similar conversions at its Gurgaon property as well. Similarly, Dreams Mall, spread across 8 lakh sq ft in Kandivali, Mumbai, and owned by Satra Properties is being converted into residential space. Only 10% will remain for retail purposes.
Meanwhile, Housing Development and Infrastructure Ltd is in the process of converting one million sq ft of retail into commercial development. Rustomjee Builders too is converting its under construction 4 lakh sq ft retail mall development into commercial space. Also, Matushree Developers is converting 100% of its 7 lakh sq ft retail mall development into commercial space
RMZ Galleria in Bangalore too has stopped marketing one million sq ft as retail and converting it into commercial development. DLF has recently sold off its Whitefield (Bangalore) retail space to Netapp for office construction. Pune-based International Convention is also in the process of changing bulk of its 7 lakh sq ft retail space into office space. Across the country, 13% of the planned retail development has been converted for other uses, like office or residential, in the past year and half, Gulam Zia, national director research and advisory services Knight Frank India Pvt Ltd, said.
However, this sort of conversion has put an adverse impact on creation of further retail spaces. As there were no significant additions in retail malls, it has already started showing on supply crunch ahead. Going forward, supply in the short-term may already be less than the demand putting upward pressure on rentals, Zia added.
Ambar Maheshwari, head of investment advisory, DTZ International Property Advisers, said, Demand for development of retail mall is being deferred in prime locations. .
Ketan Sheth, managing director, Goldmine Project Consultants, said, Over 26 million sq ft of commercial space would hit the market by 2012, of which, 11 million sq ft would be ready by this year itself.