Developers of shopping malls delay projects amid slowdown
Mumbai: Developers delayed adding nearly 44% of the 2.27 million sq. ft of shopping mall space they were to add in the first half of this year (January-June) even as the retail trade took a hit from slowing economic growth.
According to Cushman and Wakefield Inc., a real estate consultant, this 1 million sq. ft will now be ready in the second half of the year or next year.
In a report, Cushman and Wakefield said nearly one-fifth of the space in malls in the big cities is vacant.
The economic slowdown apart, the inability of retailers to pay high rentals is another reason why developers may have delayed the projects, analysts said.
“Some of these deferred projects will find alternative uses," said Sumit Dabriwala, managing director, Agre Developers Ltd, part of Kishore Biyani’s Future Group.
Agre has six properties spread across 900,000 sq. ft in which the Future Group’s retail businesses occupy about 50% of space.
The $28 billion (around ₹ 1.4 trillion) by revenue organized retail industry accounts for 6-7% of the overall retail trade in India. By 2020, it can double or even treble its share, depending on the economic environment, a report put out by the Boston Consulting Group and the Confederation of Indian Industry said.
For instance, Aditya Birla Retail Ltd, a unit of the $28 billion (around ₹ 1.43 trillion) Aditya Birla Group, has shut 10% of its small-store food and groceries business run under the brand name More in some large cities and exited from Mumbai as it focused on profitability.
The company had secured and unsecured debt of ₹ 3,113.36 crore in March 2011, according to its cash flow statement submitted to the Registrar of Companies.
Its stand-alone revenue was ₹ 687.93 crore and the firm posted a loss of ₹ 423.10 crore in fiscal 2011, according to its annual report.
Retailers prepare their expansion plans at least two to three years in advance.
“We will add 2 million sq. ft space to our total footprint of 16.5 million sq. ft over the next two years," said a spokesperson for Pantaloon Retail (India) Ltd, India’s largest listed retail company. In an investor update earlier this year, Pantaloon Retail said that it had stopped signing up for space in new properties.
“The delay in launch of new malls impact the store opening plans of retailers," said Abhishek Ranganathan, an analyst at Mumbai-based brokerage MF Global Sify Securities India Pvt. Ltd.
A Cushman and Wakefield executive said the delayed projects don’t necessarily spell bad news, at least not for retailers.
“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," said Jaideep Wahi, director, retail agency, Cushman and Wakefield India.
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