Mumbai: In an attempt to beat the current market slump, realty firmDynamix Balwas Group, or DB Group, has shelved its ambitious retail venture to build the country’s largest shopping mall in suburban Mumbai after spending more than a year planning and designing it. The developer now plans to construct low-income, budget homes on the land purchased for the Rs700 crore Ozone Orchid project in Dahisar.
The group had earlier converted a mall project in Kandivli, another Mumbai suburb, into a housing complex.
Not happening: Golden Chemicals factory unit at Dahisar in Mumbai where the group’s proposed shopping mall was to come up. Dipak Hazra / Hindustan Times
“We are not going ahead with our retail projects because retail isn’t a good option in the current situation where there is a financial downturn,” said Shahid Balwa, managing director, DB Group. “Retail developers are suffering and retailers are threatening to move out if rents are not lowered.”
The decision to convert the 2.5 million sq. ft of retail space into a housing project comes at a time when developers are facing a liquidity crunch, rents are falling and the retail scene looks shaky across the country. This has prompted other developers also to go back to their design boards and customize their projects to beat the slowdown.
The withdrawals from the retail sector were triggered off last year when DLF Ltd, the country’s largest developer by market value, shelved its high-profile 4.5 million sq. ft Mall of India project in Gurgaon, on the outskirts of Delhi, due to cash-crunch and falling rentals. Mall of India was proposed to be the biggest mall in the country, larger than DB Group’s Ozone Orchid.
DLF has also changed its retail plans on the Mumbai Textile Mill land and is now building commercial office space on the same location.
DB Group, which had planned to fly down water-themed atriums from the US for the Ozone Orchid project, will now sell one-and two-bedroom flats on the site priced modestly between Rs2,000 and 2,500 per sq. ft. The group has already opened bookings for 600 apartments it is building on the site for Kandivli mall.
A 28 January report on the retail sector by Mumbai-based Centrum Broking Pvt. Ltdpoints out at how the retail segment has been impacted by weak consumer sentiments and slowdown fears despite large discounts offered by retailers. The psychological fear of an economic slowdown more than a real slowdown, lower footfalls and lower churn in the discretionary category such as electronic and apparel have weighed down the retail sector, the report said.
“As per cost-benefit analysis, mid-segment priced residential projects are easier to sell and assure revenue generation in such conditions compared to retail malls, where liquidity is generated at a later stage when retailers start coming in and paying rents,” said Bappaditya Basu, vice-president (retail), Jones Lang La Salle Meghraj, a property advisory.
Not only are projects at the planning stage being re-formatted, but built-up retail space is also being converted into commercial space as retailers shut shops.
At the mid-sized Citi Mall in Andheri, a Mumbai suburb, a number of offices have replaced shops while Raghuleela Mall in Mumbai has seen nearly 60% of retail space being converted into commercial space over the last few months.
“Between 2006-07, everyone was getting into the retail business announcing big expansion plans, opening stores only to raise funds which is why, today, retailers are resizing stores, surrendering space to developers and shutting down stores,” said Susil Dungarwal, retail analyst and founder of Square Feet Management Pvt. Ltd, a Mumbai-based retail consultancy. “Retail is a business that needs a long-term strategy.”