Large format malls to see highest growth in South India

Written by Mona Mehta | Mumbai | Updated: Sep 8 2009, 06:13am hrs
The Rs 45,000-crore organised retail sector, growing at the rate of 12%, is all set to witness the maximum number of large format malls and branded retail stores in South India, which will be followed by North, West and the East in the next two years.

According to Kumar Rajagopalan, chief executive officer, Retailers Association of India (RAI), retail space is cheaper in South India. Retail rentals in the NCR and Mumbai have gone up three times between financial year 2006-07 and 2008-09 compared to the figures in South and East. High rentals naturally come as a disincentive for setting up new retail properties.

In the South, retail rental rates vary between Rs 50 per sq ft to Rs 150/200 per sq ft depending from one region to another. In comparison to Mumbai and NCR, retail rental rates in Chennai and Bangalore are cheaper by 50-60%.

A report by leading international property consultants, Jones Lang LaSalle Meghraj and Cushman & Wakefield India in association with Shopping Centres Association of India, named Mall Realities India 2010, states that over 100 malls of over 30 million sq feet of new shopping centre space are projected to open in India between 2009 and end-2010.

Bappaditya Basu, vice president - retail, Jones Lang LaSalle Meghraj (JLLM) too agrees that because of high real estate costs, North India is not a preferred destination for large format and departmental stores, but there is a growing demand for luxury goods. The ones that are looking to expand in this region are luxury brands like Zara and white goods brands like Croma. Aditya Birla is also looking to open up a few stores in some parts of North India, provided that they get appropriate properties at the correct prices. East India is typically a spendthrift economy and retail per se has not expanded beyond Kolkata. Future Group is the only player currently bullish on East India because of its value format. In South India, Future Group, Aditya Birla, Tata and Reliance are all keen on increasing their retail footprint, Basu adds.

Post the release of this report, JLLM has recently done a realty check on the region-specific upcoming mall projects. In South, while Isckon Charities is setting up Gokulam Mall in Bangalore, Marg Constructions is developing Riverside mall in Chennai. Indu Projects is setting up Indu Mall and IJM is constructing IJM Mall in Hyderabad. ETL is constructing ETL Central Mall in Coimbatore.

DLF Brands -- the retail and lifestyle division of DLF Ltd-plans to set up fourth store apart from introducing DKNY jeans to India soon after opening three Donna Karan New York (DKNY) stores in Delhi. In West, K Raheja Constructions is developing Infinity 2 mall at Malad in Mumbai, Satra Property is setting up Dreams in Mumbai. Meanwhile, a Market City mall in Kurla, Mumbai is coming up from Marketcity Developers. Paranjpe Schemes is setting up Xion mall at Hinjewadi in Pune. DLF is setting up DLF Mall in Lower Parel in Mumbai.

Kshitij Investment Advisory Company (KIAC), the real estate arm of Future Group, is planning to set up two malls in the East by mid-2010, said a company source on promise of anonymity. While J P Infrastructure (P) ltd and Prozone Enterprises (P) Ltd are setting up Prozone Mall in Aurangabad.

Adidas India Marketing Pvt Ltd is planning to set up 200 branded stores which will include maximum Adidas shop-in-shop formats and a few flagship stores in top 80 cities in India in this financial year. This is mainly because retail rentals have fallen sharply, says Tushar Goculdas its director - marketing and sales. Meanwhile, Portico New York, a brand by Creative Portico (India) too is planning to set up 160 Portico branded shop-in-shop retail formats and thereby increase penetration in North and South India, according to Chandan S, its senior general manager-retail and marketing.

Property Zone - a joint venture between Old Mutual Investment Group Property investment Ltd, South Africa and ICS Realty Private Limited, India - is in the process of setting up 5 to 6 branded malls in East, followed by South and North, Siddharth Sahgal, centre director, Property Zone told FE, Funds to the tune of Rs 500 to Rs 600 crore has been routed through South Africa which we will manage and infuse to set up retail formats in India. Pension funds based in South Africa are planning to invest an additional Rs 1,000 crore to Rs 1,500 crore in the Indian retail sector soon, a highly placed industry source told FE.