In one word, the answer to that question would be, LOTS. If
you are among the many who are wondering why we are covering the
business of retail in this real estate magazine, relax. We can
assure you that you are not alone. While it may come across as
rather strange, but in India, especially in its metro cities, the
entire business of retail real estate is today worth hundreds of
crores of rupees. How are these constructions affecting the growth
of real estate market is what this story aims to showcase for you.
So read on.
Malls have been in India for a short period
of 4-6 years, as compared to over five decades internationally. How
did the mall evolve, why and where are studies that have been done
at length in the global markets.
We share a few of these theories here to give
you a better understanding of what malls are all about.
Traditionally malls are an American concept, aiming to recreate the
traditional marketplaces of old. Here you can get all that you want
in one place, only it is better. In a mall, the environment is
controlled, landscaped and designed to perfection to help make your
shopping experience here truly enjoyable.
There have been various perceptions that the
malls have had to deal with in India, given the vast majority of the
population that is yet very price-sensitive. As the income levels
have risen and with it the availability of plastic money and loans,
so also has the disposable income of the middle and upper middle
class of the society risen.
The malls today are targeted at these
audiences, inviting them to experience the convenience of mall
shopping and egging them on towards growing consumerism.
Looking at what it takes to set up a mall and
how these factors vary in India from the international mix, gives
one a true pointer as to why malls are such a big thing in the
Indian real estate markets.
Real
estate is a big factor in setting up malls in India.
To start with, the global standard for real
estate costs v/s revenue is in the region of 3-6%. In India, this
very fundamental cost is in the region of 7-27%. Given that real
estate forms such a
large component of the business, it has been natural that those who
have existing land holdings or understand the real estate and
construction business are among the key players in the Indian
markets today.
This is not the case with global malls. Most
of the international malls are run by sales and marketing companies,
who have been in the business of wholesale, organisations that
understand the benefit of making volume purchases and have the
market distribution network in place to reach these products to
various outlets across the country or state.
The various retail outlets in the malls work
on slim margins, as they have to continue to be competitive with the
other non-mall retailers, while incurring higher overhead costs.
This forces the mall retailers to be smarter, and encourages them to
stock their shelves with goods that offer viable business margins.
While there is even now a constant debate in India over how the
malls are going to eliminate the small retailer, the fact of the
matter remains that this has not really happened.
Malls
as a lifestyle shopping experience
The business logistics of the mall ensure
that over time, consumers prefer to shop for the high investment
more expensive product categories of malls. But the small retail
stores around the corner will continue for all the daily consumption
that a family has to do. What malls do for the economy of a
neighbourhood is these lead to a certain segregation of markets. The
malls with their glitz and glamour end up selling the lifestyle and
high end expensive products that a customer would need. These would
include electronics, home appliances, designer clothing, and the
like. But the basic necessities would continue to be purchased and
sourced form the local corner stores.
As malls with their huge investments in real
estate, and services talk of catchment areas of a particular
location, the promoters of the mall naturally seek a certain minimum
size of prospective target audience that will make the entire
project truly successful. Speaking on the subject, Mr. Anand
Sundaram, General Manager, Inorbit Malls P Ltd., Mumbai says, “The
feasibility of mall developments require to be analysed in great
depth and would include factors like the nature of the catchment
area, the demographics and psychographics of the prospective
consumers, the infrastructure of the city / town in that particular
area and certainly the retail trade itself – The depth and
maturity of the various retail traders and retailers.” This means
that if the existing infrastructure is under-developed, the
developer needs to take a serious look at investments would be
required to make this available to the prospective visitors.
Malls
in Mumbai, and other cities: a brief review
Today the favourite mall cities of India are
Mumbai, Pune, Delhi, Bangalore, Hyderabad and Chennai. While much as
been said and done about the mushrooming of malls in these cities,
the actual growth has been slow and steady.
In the
city
In Mumbai, Crossroads, the first mall in the
part of the country, was set up in the hearth of the city, by
Nicholas Piramal group. This mall worked contrary to the standard
mall rules. Malls are usually seen as a suburban trend. This was set
up at Haji Ali, the very heart of the city. While parking space was
allowed for, it was never enough for the Mumbai residents who just
couldn’t get enough of this mall.
In the suburbs
Meanwhile the Mall has started making its
inroads into the suburbs. R Mall and Nirmal Lifestyles, both
happened almost simultaneously in the forgotten suburb of Mulund in
central Mumbai. A look at the size and dimensions of these malls
tells you why Mulund was chosen. These malls have sprawling shopping
spaces, with R Mall being a closed version, and Nirmal Lifestyles
being an open air structure. It is malls like these that make one
realize the role of real estate in this business. Again, both of
these malls have been set up by builders: the former by the Runwals
and the latter by Nirmal Developers.
The logic seems indisputable. Such huge
tracts of land would not have been available anywhere nearer the
city. And if they were, they would cost the buyer astronomical sums.
Compared to the city spaces, the quite suburb of Mulund offered wide
roads, a non-so-populated area and on influx of new residents moving
in from more affluent parts of the city.
Following the success of these couple of
malls, the trend began developing fast and furious on the western
side as well. This is Inorbit Malad and The Hub, Goregaon; and
Centre One, Navi Mumbai. The other trend that was witnessed was the
growth of multiplexes along the city which aimed to offer the
consumer a similar ‘different’ experience. These included the
Cine and Adlabs series of multiplexes and have come up around the
city.
In response to the speculation that soon
there will be one mall too many, Chesterton Meghraj, a leading
property consultant in India, in its recent study points out that,
“In the metro only 20 malls covering 35.5 lakh square feet will be
completed in 2004, 31 will become operational in ’05 and 26 are
likely to see the light of day in ’06. The largest number of malls
moving to completion this year – seven malls covering 1.09 million
sq. ft. – is in Mumbai, followed by Delhi, which will account for
0.87 million sq. ft. distributed over three malls”.
As Mulund has been to Mumbai, so Gurgaon has
been to Delhi. This suburb on the outskirts of the capital has been
practically transformed following the setting up of Arcus, a few
years ago. This was followed by the growth of a several furniture
stores along the families of Delhi go shopping over weekends.
Speaking on the matter of how these malls
impact the real estate of the neighbourhood, Mr. I S Narula,
President & CEO, of Ishanya, an upcoming speciality real estate
(interiors and exteriors) mall in Pune, stated, “To start with, as
business picks up in the mall, the value of retail real estate is
enhanced. This is followed by the increase in the rates of
surrounding residential and commercial real estate prices. The
reason being the local transport and infrastructure improves, the
disposable income of the local residents goes up as many find
employment in the malls. Further new residential complexes are able
to demand higher prices as they are closed to a state of the art
shopping and recreational centre”.
What this means to a home owner, is that if
there is mall expected to come in the area of his current residence,
he would do well to hold on to his property. As the mall comes up,
the prices are sure to rise. Similarly, as a buyer, he would do well
to invest his monies in a home around an upcoming mall as the real
estate in the area is sure to witness a price rise.
With this perspective, the areas that are
being closely monitored by the real estate industry watchers is the
Bhandup-Vikhroli belt, that has seen the sale of several large
factory lands, and the Parel belt in central Mumbai, where mills
lands have finally been made available for develelo9pment. Navi
Mumbai is another part of the city that is seeing rapid development
of malls.
But metros are definitely not the limit. In
MP, at a distance of 50 km from Bhopal, ITC has rolled out its rural
retailing initiative called Choupal Sagar. The range of products
being sold is bigger than any of the hypermarkets in Hyderabad or
Bangalore. Located in the heart of MP’s soya cultivation belt,
Sagar sells everything from FMCG goods to readymade apparel and two
wheelers and even tractors.
After just 6-7 years of operating in the
Indian markets, malls have touched the second phase of the category
lifecycle. The novelty of the air-conditioned shopping experience is
now becoming the norm as more and more urban families drive out in
their private transport to these hubs of activity. Now the next set
of malls that are coming up across the country are destination
malls, specialty malls, leisure malls. As has been the trend world
wide, the new malls work on even larger concepts than what we see
around as today. Hence their need of space is larger. As they begin
to explore the areas around the main cities, real estate in these
peripheral areas is sure to see a boom. In fact, it would not be way
off the mark to watch which areas the malls are selecting, to
identify the next big boom in real estate for a given area. So if
you are into investing in real estate, you would do well to track
the upcoming malls in your region.
Courtesy : PROPERTYSCAPE.
