After over eight years and Rs1,800 crore in the making, India’s largest mall will fully open next week in Noida, an eastern suburb of the country’s National Capital Region (NCR).
The two-million-square-feet, six-floor Mall of India, built by real estate developer DLF, has been partially functioning for a while, but this’ll be the proper inauguration with all the required shebang.
Clothing retailer H&M will have a four-floor store here—its largest in the country. A Zara outlet is under works. GAP already has a mid-season sale going on. Besides the 330 brands on display, this humongous space also showcases a string of restaurants, cinema halls, and gaming zones, to whet the appetite of the aspiring middle-class consumer.
At the south-western end of the NCR, another large parcel of land is waiting to go under the hammer. Multiple firms are known to be bidding for the airport mall—likely the size of six football fields—which is expected to cost around Rs600 crore to develop.
UAE-based LuLu Group, owned by a non-resident Indian from Kerala in the country’s deep south, is expected to invest Rs5,000 crore in building similar spaces in the country over four years.
With such frenzied activity, it may seem malls have never had a better time in Asia’s third largest economy.
Yet, despite its large traditional retail market, India has had a tenuous relationship with malls. The model has mostly floundered over the last decade, with only a handful of its estimated 450 such shopping spaces doing roaring business.
In fact, research reports suggest that India’s fresh mall supply peaked at 14 million sq. feet between 2011 and 2012. By 2014, fewer real-estate companies put money in malls as the housing market plummeted, with net-addition of retail space in malls at two million sq. feet.
If anything, the grand displays are merely desperate attempts to stoke consumer interest, which has been subdued for a while in a tepid economy. And it’s not just in India. Once a symbol of conspicuous consumption in the US, malls are today withering there. In China, early signs of distressed malls are emerging.
Globally, according to a report by real estate consulting firm CBRE Asia, around 114 million sq. feet of mall space was added in 2015, down from 130 million sq. feet in 2014.
Online retail, with its massive discount model has emerged as a major threat to offline spaces. Shoppers in India, China and the US are increasingly smitten by the likes of Flipkart, Alibaba and Amazon.
Between 2014 and 2015, Indian brick and mortar retailers struggled for footfalls as shoppers bought cheaper gadgets and gizmos, groceries, and apparel online. While the share of online retail is expected to jump by more than five times, from 2% in 2014 to 11% in 2019, the share of brick and mortar modern retail is expected to fall from 17% to 13% during the same period.
Yet, developers are not the least perturbed. A few of them are making a case for even bigger malls.
Will they succeed? A few, maybe. Here’s why.
Since 2014, when fewer developers were building malls than in the past, more foreign brands have firmed up plans to enter the market. India, according to the Boston Consulting Group’s reckoning, is a country where a younger population promises to trade up to branded clothing, nearly doubling its retail market to $1 trillion from the current $600 billion.
“Where else do you have a large population that isn’t ageing and consumers who will not stop shopping in the near future?” asks Pankaj Rehjhen, managing director, retail services at real estate consultancy Jones Lang Lasalle.
Besides, more retailers are hoping that younger Indians will use large retail spaces as entertainment destinations.
“It’s all about experience,” says Pushpa Bector, executive vice-president and head, DLF Mall of India, making a case for more cinema halls, restaurants, and sporting spots in the facility.
On cue, malls too have upped their ante to accommodate more food and entertainment options. “Mall is a community centre, you have to create exciting things for shoppers to walk in,” says Renjhen.
Joel Stephen, senior director and head of retailer representation, real estate consultancy CBRE Asia, makes a case for “retailtainment,” which includes experiential retailing, food and beverage, and leisure services, to attract footfalls.
“The lack of quality retail space remains a hurdle for international retailers looking to expand within India,” said Anshuman Magazine, chairman and managing director of CBRE, South Asia. However, he anticipates “addition of new retail space in the mid-term to ease some of this supply pressure.”
There are skeptics, too, who think Indian developers are better suited to building compact malls.
Aditya Sachdev, director, retail, Knight Frank India, another firm that advises companies on real estate, argues that large malls are a one-off. “We don’t have that kind of real-estate or land parcels in large cities to make more Malls of India.”