The slowdown and cash squeeze is dampening developers excitement over malls. Consider this: the retail real estate market recording a deferment of over 30% of retail mall space against the projected supply for the first half of the year. The national capital region (NCR) saw the highest mall supply deferment of over 80%, with vacancy levels at 28%. NCR saw only 1,20,000 square feet of mall supply in Q1 and no supply in Q2, 2012.
Experts feel that much of the mall buzz was because of the FDI factor, which did not happen. As a result, 10 lakh square feet of mall space has been deferred for the next one year. In Mumbai, DLF converted a large piece of land in Lower Parel, originally meant for construction of a mall, into a residential complex. DLF spokesperson Sanjay Roy admitted to FE, "We bought 17.5 acres in Lower Parel and explored the possibility of a mall, residential and commercial property, but since a mall did not seem a viable option, we opted for residential development."
DB Realty had bought 1 million sq feet for the construction of a mall in Mumbai suburban district Dahisar, but, like DLF, constructed apartments over it. A DB Realty Group spokesperson told FE, "We were initially thinking of a mall in Dahisar but we changed our plan as it did not seem a viable option. We have already sold a large chunk of the residential complex."
Vineet Singh, business head, 99 Acres.com, confirms the trend. "Considering the fact that 25% of average mall spaces in India are unutilised, mall developers are deferring their plans of constructing malls, he says. However, Jaideep Wahi, director (retail agency), Cushman & Wakefield India, a real estate consulting company, is optimistic. This slowdown need not be viewed as a negative growth indicator for the retail real estate segment. The current pace is, in fact, expected to help in maintaining a healthier supply to demand equation, especially for oversupplied micro-markets. With high vacancy levels as well as cautious expansion plans of retailers, the deferment of supply is a necessary measure to bring stability in the retail market, he says. Other real estate firms in Delhi-NCR who have deferred their plans include Real Tech Group's Capitol Mall of 2 lakh sq feet in Paschim Vihar; Eros Group's Metro mall of 2, 50,000 sq feet; Sewa Group's Mall of Rajouri spread across, 2,10,000 square feet, and Chadhha Group's Wave One. The country biggest mall project by DLF in Gurgaon has been on hold since 2008. Data supplied by Cushman and Wakefield says fresh mall supply for H1 2012 stood at 2.27 million sqft. Approximately one million sq ft of expected mall supply was deferred to the second half of the year or next year. The overall vacancy rate for the major cities as of H1 2012 stood at 19.6%.