The Hindu Business Line : `Only 10-12% of malls in India successful'

Kolkata June 22 The retail boom in India is likely to push up the number of malls in the country but uncertainty remains about the success of these malls.

According to industry experts, only 10-12 per cent of about 120 operational malls in India have been successful. These are numbers available with various retail and real estate analysts.

"In India, only 10-12 per cent of the malls have been a success," said Mr Susil Dungarwal, a Mumbai-based real estate and retail analyst. Asked on what basis the numbers had been calculated, analysts, including Mr Dungarwal, said that while there were a dime a dozen malls across the country, industry people were aware of only about 12 to 15 of them which have attracted a satisfactory number of footfalls.

Industry experts have attributed issues such as inadequate planning, improper zoning, poor tenant mix and accessibility as major reasons behind the poor performance.

"A successful mall is where everyone (developers and retailers) is making money. Unfortunately in India, malls are seen as real estate ventures and people do not appreciate the service part involved in it," Mr Ankur Srivastava, Managing Director, DTZ India, told Business Line.

"Primarily the malls are not planned well and are being created as real estate ventures. Important aspects such as design, tenant mix are being overlooked while developing a mall," he added.

"There is a big void of skilled retail professionals who can manage these malls efficiently," Mr Dungarwal said. There is also confusion regarding the definition of a mall in India and often departmental stores are erroneously referred to as malls.

According to Mr Tirthankar Banerjee, East Head - Retail Services of Jones Lang LaSalle Meghraj: "These days whoever has some land plans to set up a mall. Only 25-30 per cent of the developers really go into the depth of understanding the retail business."

Specialty malls

"For instance specialty malls in India are not doing very well. The Indian market is still not mature enough and it is a bit early to introduce this concept here," he added.

According to industry experts, a possible solution could be a revenue sharing model between the developers and retailers instead of fixed rentals. "If developers and retailers agree to share their revenue, then both will work towards the success of the mall," Mr Srivastava said. "Also, in the revenue sharing model, service tax does not have to be paid," Mr Banerjee added.

However, in reality, very few are willing to accept this model because most developers do not have the confidence that the malls will succeed.

"It's very difficult to define a success mantra. But if developers and retailers join hands at the planning stage then there is a strong possibility that the mall concerned will be a success," Mr Dungarwal said.

Currently, the Indian retail industry is valued at $330 billion of which organised retail is about two to three per cent (about $7.5-8 billion).