• Home

Shopping malls pop up in rural India

The government's FDI regulations in single- and multi-brand retail adds boost to India's retail culture, notably in smaller cities

Time was, not very many years ago, when shopping in Indian cities meant walking carefully on over-crowded roads and dodging trucks, cars, taxis, bikes and cycles - think of Linking Road in Mumbai, Brigade street in Bengaluru, or Karol Bagh in Delhi - haggling with the vendors, picking up things you'd probably not seen before, and heading home with all the stuff.

Only to end up being disconsolate, as your neighbour was busy showing off stuff he/she bought in Dubai or Singapore just two days back during a quick visit. High-quality 'imported' stuff bought at very low rates, the neighbour announces proudly, much to your chagrin.

But that was in the past. Today, you can fly down to Dubai or Singapore - or London or even New York, for that matter, as getting foreign exchange is no more a problem. But you would in all probability drive down to the shopping mall in your neighbourhood, park the car securely and spend the next six to eight hours shopping, watching films, enjoying meals in the numerous cafes and restaurants, and 'gupshupping' with family and friends.

Shopping mall boom

India is witnessing the great shopping mall boom, with hundreds of shopping malls dotting the urban landscape - in metros, large cities, state capitals, and even smaller towns.
On most weekends one finds hundreds of cars lined up at underground parking lots in the malls and consumers having a wonderful time. And it's not just the affluent or the upper-middle-class shoppers who saunter at the malls. Increasingly, you find ordinary workers with their families strolling around the malls, carefully comparing prices and trying to get items at stores that offer hefty discounts.
Not surprisingly, owners of shopping mall chains - and even global giants - are planning an aggressive foray into the markets. IKEA, the Swedish giant that opened a sprawling 40,000 sq ft mall in Hyderabad last August to offer over one thousand products, has ambitious expansion plans for India.
Peter Betzel, CEO of IKEA India, said recently that the company plans to invest a massive Rs50 billion in Uttar Pradesh over the coming years, generating more than 8,000 jobs.
"In line with our new retail direction, we intend to set up a mix of large and smaller city centre format stores complimented by e-commerce in the state over time," he added. IKEA is also planning to open large stores in Mumbai, Bengaluru and Delhi-NCR soon.
"The government's decision to allow 51 per cent FDI in multi-brand retail and 100 per cent FDI in single-brand retail under the automatic route was a definite crowd-pleaser that attracted giants like Walmart to make forays into the country," says Anuj Kejriwal, Managing Director and CEO, Anarock Retail, India's leading retail advisory services team. "The government is now mulling to further tweak norms for retail trade - similar to SEZs - and enacting a 365-days working policy to help India climb higher on the Ease of Doing Business index among 190 countries."

Liberalising FDI in malls

The Indian government's move to liberalise FDI policies related to retailing is expected to further boost the mall sector. There were more than 600 malls operating in the country last year and the numbers are growing rapidly.
Nearly 20 years ago when malls began coming up, there were just a handful of them in Mumbai, Bengaluru and Delhi. But today, malls are sprouting up in even the smallest of cities.
According to Kejriwal of Anarock Retail, besides the top metros, tier 2 and tier 3 cities also saw a sharp growth in retail business. Cities including Ahmedabad, Vadodara, Bhubaneshwar, Chandigarh, Lucknow, Indore, Jaipur, Nagpur, Coimbatore, Kochi and Thiruvananthapuram were among those that saw a spurt in new malls.
"Out of the total new supply becoming operational in 2019, nearly three million sq ft area will be coming up in tier 2 and 3 cities," he says. "The cities that will see new malls opening in 2019 include Chandigarh, Dehradun, Lucknow, Ranchi, Rourkela, Solapur, Udaipur and Vizag."
Small towns, big malls

The market size of tier 2 and tier 3 cities is expected to expand from the present $5.7 billion to a massive $80 billion by 2026, adds Kejriwal. "India's tier 2 and tier 3 cities are definitely well-set to be the growth engines of the country's retail future, and mall developers as well as retailers are actively looking to expand there," he adds.
Cushman &Wakefield, another consultancy, estimates that nearly 35 new malls will be operational in eight leading cities by next year, adding another 14 million sq ft of space.
India's retail sector is projected to nearly double from about $670 billion in 2017 to $1.3 trillion in 2020. And there appears to be no shortage of funds to set up these new malls and complexes.
Private equity players invested nearly $300 million in the Indian retail sector in the first half of 2018. Top PE funds including American major Blackstone and Singapore's sovereign wealth fund GIC have been splurging on shopping malls, buy controlling stake in many of them.
And though land is a high-priced commodity in the metros, malls continue coming up - and will do so over the next two to three years - in metropolitan areas including the National Capital Region, the Mumbai Metropolitan Region, Kolkata and Bengaluru. The rapid growth of malls (almost all malls have a wide variety of eateries, entertainment spots including multiplex cinemas and are well-maintained with adequate security) is also having its impact on traditional shopping centres, cinema theatres and even restaurants in leading Indian cities.
Interesting features at malls include bowling alleys, arcade games, and 5D cinemas (besides the regular ones that are extremely comfortable and clean) and the usual bank ATMs, and even direct access to metro stations in some cities.
- nithin@khaleejtimes.com