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The Fall of the Indian Retail Mall

From DNA: Plunging sales see retailers quit malls:

ETAM, the French lingerie brand that has a joint venture with Kishore Biyani’s Future Group, recently pulled out of Palm Beach Galleria mall in Navi Mumbai, together with six other retailers such as grocery chain Foodland Fresh and Manoranjan sarees.

Hey, I live close by and I was in the mall two days ago. Not only have the above shops gone, three of the six small shops in the food court have vanished. (Two large restaurants, a bread variation shop and two veg restaurants are all that are left). This could be because the attraction of the multiplexes is down, due to Fame setting up at the Raghuleela mall close by.

The mall scene here is mega oversupplied. There are four malls within a kilometer or two of each other. Raghuleela, Center one, City Center and Palm Beach Galleria. Another mall in Sanpada, Full Stop, is completely empty for six months and unoperational. Next to Palm Beach Galleria and City Center (which are next to each other) there are about 6 more massive complexes coming up, no doubt intended as shopping and office complexes. And there’s Haware’s Fantasia mall in Vashi and Centurian in Nerul, both of which are near completion.

And this is just Navi Mumbai – the Nerul/Vashi area. Add to this malls in Kharghar (5km away) and Belapur (2km), and you’ll see the pattern go nuts. Mumbai has a greater density of people so malls should be more profitable. But this problem is going to be there in Delhi and Bangalore as the footfalls don’t really justify the high rents.

The National Capital Region (NCR) has also seen the exit of retailers in the recent months with outlets such as Tuscan Verve and Maya’s Toy Store moving out of DLF City Centre owing to poor sales.

Big malls in Bangalore, the country’s IT capital and home to wealthy techies, is seeing vacancy levels of 50 to 90 per cent. Eva Mall on Brigade Road, Bangalore’s high street, has seen the closure of all its retailers and the mall owner is re-drafting sub-lease agreements with new tenants.

Purva Pavilion, in Church Street, has been half empty for the last four years and Sigma Mall, on Cunningham Road, has seen 50 per cent of small stores moving out.

Globus, the apparel retail chain of Mumbai-based Rajan Raheja group, closed two stores in Bangalore. The chain had plans to open 100 stores in the next four years, but now it expects to open those stores in the next five to six years, given the high property costs and unavailability of real estate on time.

Bad news and then more bad news, everywhere. Remember how the funda worked:

  • “Premium” apartments come up
  • Malls come up nearby saying ok, these guys need to shop
  • Apartment rentals and prices go up saying oh there are so many malls nearby. “Developed” area.
  • Mall rentals go up saying look at the real estate prices here.
  • Some big retailer sets up shop and promptly loses money but terms it a long term investment.
  • Everyone else says heck, if he can lose money, so can we, so they also do the same thing.

Now someone’s knocked some sense into everyone’s head. (It’s called “reality”) So as real estate prices have come off the highs, and retailers vanish, soon mall and house rentals will follow. Ghost malls are likely to be common as developers, now flush with cash after the boom, decide they will “ride it out”. They’ll pay interest – increasing rates, btw – until they can bear it no more.

Then they will give in and do anything and everything to get people back. Reduce rentals. Get diversified shops (not just apparel, which seems to be the case now).

But that will happen only after this great recession.

  • Roshan says:

    >”But that will happen only after this great recession.”

    what do you mean by this?
    this warrants another BIg post from you..:)

  • Anonymous says:

    >The good news from Hyderabad is that finally realty is crashing. Checked out Maytas Hill County — these are the same guys who were offering “premium” apartments @1.5 crores (not joking Deepak). Now it’s priced @1.2 crores and positioned as value buy in a matter of 5 weeks. I did tell the agent that value buy it sure is, but to the realtor’s mind only. The insider news is that all these crore+ apartments do not have any buyers in Hyderabad, where IT hiring is slowing down.

    The agent is still calling me twice a day. 😀 I think in 6 month’s time a 3BHK for 30-35 seems reasonable. Question for you Deepak: How long does one wait in such circumstances?

  • Deepak Shenoy says:

    >Roshan: Am still formulating my view, but we’re already in it, and we’ll know in hindsight. Not depression but recession and I think I will have to wait two quarters to confirm.

    Anon: Wait as long as you can 🙂 Prices need to be ridiculously low. The panic hasn’t even started yet IMHO. But then it’s entirely possible that it won’t start at all and recover like a normal correction. But I don’t think this is normal by any standards, so it’s apt to wait.

  • Siddharth says:


    Do you envisage soft or hard landing for the economy?
    Is it like too fast too much growth?

    In sense of housing market, I had been thinking that I didnt get in the ‘home owner’ train in time, but as the economic things unfold everyday it makes me feel comfy that I didnt just went in the flow and buy property at such highest prices. But it will take some good amount of time to beat it low.
    Patience is good. Hope so.

  • Ninad Kunder says:

    >Hi Deepak

    I think most ppl dont realise that when u put up 10% as margin in a realty investment and take those nice lil housing loans, one is effectively leveraging 10 times. Most ppl will not do that with stocks but housing is a diff matter.

    There is a general belief in this country that realty prices never come down. So even if u have a short term drop, in the long run it pays off. I think we are lining ourselves up for a rude shock on this one.

    I think this time around we will start seeing the phenomenon of ghost buildings where builders just abort a project midway as it becomes unviable.



  • Mahendra Naik says:

    >Hi Deepak,

    Housing prices have not yet corrected to the extent they should have. A mere 15 – 25 % correction is nothing compared
    to the increase in the past.
    Also present prices hold only in theory. Practically any one who’s tried to sell a flat or shop will tell you that deals are just not happening. At least we can get out of stocks at a price if we so wish, but illiquidity and maintenance charges of housing societies are a deadly combination.

  • Prax says:

    >This was a nice post
    reality creeping into realty !

    I had done a post on new construction flats selling at half the rate in Bandra.
    The Builders are desperate and some trapped – Diwali will be their testing time – if demand doesn’t pick up prices should really go down south and it is not unreasonable to speculate a 1995 all over again !

  • Mohan says:

    >Interesting post. Though a few months old, is still probably relevant. Are the mall back in Black yet?

  • Deepak Shenoy says:

    >Mohan: 18 months now – and counting – I've moved to Gurgaon and teh situation here is just about as bad in the malls around. On Sohna road, about six malls are completely ready, but just ONE is occupied. The others are empty shells, with boards begging someone, anyone, to please come set up shop.

    Omaxe Gurgaon mall is sorta occupied (though it's crappy design and only 30% occupied really) The Omaxe wedding mall has got an SRS cinema going but no shops. Others – Raheja, Spaze, Omaxe City center and a couple others whose names I can't recall – all empty.

    It's going to get a lot worse, I think.