Malls in north India : Punjab favourite destination

India’s retail sector is evolving at a swift pace and is set to grow by 35 per cent by 2010. This growth has been fuelled by many factors like a strong economy, favourable demographics and rising wealth levels, especially in the middle class. The real estate sector has responded well to this retail growth. The total retail stock has been doubling every year year, from 10 lakh sq.ft in 2002 to a four crore sq.ft in 2007 and estimated six crore sq.ft by 2008-end.

At present, the retail market is estimated at Rs 13,30,000 crore  and it is growing at the rate of 10.8 per cent annually. The organised retail market’s share in the retail market is around six per cent, which equals to around Rs 80,000 crore. This retail grew at the rate of around 42 per cent last year and expected to maintain a faster growth rate over the next three years, especially in view of the fact that major global players and Indian corporate houses are seen entering the fray in a big way and expected to touch Rs 2,300 crore by 2010, which means around 13 per cent of retail market.

 

Shopping malls

If retail continues to grow at this pace, malls will get used fully. Or, rentals will get affected. Overall, the future looks promising, despite hurdles prevailing at present.  The real estate market is expected to increase to revenue of $ 20 billion (approximately Rs 800 billion) by 2010. The sector, which is growing at an annual rate of 30 per cent, is currently worth $ 12 billion (approximately Rs 480 billion). “The Indian real estate sector has emerged as one of the most appealing industries for both domestic and foreign investors and is presently the second-largest employing sector linked to about 250 ancillary industries.

The emergence of a mall culture and development of malls is a positive development. With all major retailers planning to double the number of stores and retail space that would be required in the next three years, availability of real estate space will be a key enabler of growth. And, Central Business Districts (CBDs) in many cities are not today capable of supporting the massive growth plans of retailers. High cost of retail space is certainly matter of concern.

Construction activity is in full swing in a number of projects - a fact quite visible in most cities. Some of the cities and towns of north India where developments are planned include Ludhiana, Mohali, Jalandhar, Amritsar, Patiala, Hoshiarpur, Khanna, Gurdaspur, Kapurthala, Nawanshahr, Ferozepore, Ropar, Faridkot, Muktsar, Moga, Bathinda, Rajpura, Mansa and Sangrur.

 

Punjab

Punjab’s retail real estate is expected to touch over 150 lakh sq.ft area by 2010 when the state will have around 40 operational malls. With just two malls in 2005 and 2.7 lakh sq.ft gross leasable area, the state was on the threshold of retail boom in the current year. With the completion of nine more projects, the state has, at present, around 32 lakh sq.ft.

Punjab is, thus, all set to experience the phenomenon of a major retail boom, representing a grand opportunity to all the retailers at large to exploit its huge consumption potential. It is expected that  northern India will have 136 malls by 2010.  

Ludhiana is fast emerging as a favourite destination for shopping plazas and multiplexes as a dozen of malls are coming up at a cost of Rs 600 crore. Retailers and developers riding on a wave of retail boom are adding new dimensions to the business to lure more customers. A large number of these malls are on Ferozepore road and ‘Ludhiana-Jalandhar segment’. The largest mall in the city is coming up in the western part of Ludhiana in a sprawling 26 acre land. These malls are roping in the leading brands in fashion, consumer and lifestyle products with retail spending potential to increase to Rs 5,940 crore by the end of 2010.

Besides Ludhiana, Amritsar and Jalandhar, the overall scenario of Mohali, a satellite town of Chandigarh, is dramatically changing. Zirakpur, town strategically located on three busy highways (Chandigarh-Ambala, Kalka-Ambala and Zirakpur-Patiala) has at least seven shopping malls in the pipeline. Conversion of Chandigarh-Ambala highway road into four lane and upcoming of several new colonies in this area are the factors prompting the builders to come up with shopping malls. Due to shortage of land in Amritsar, a few cinemas (theatres) are being converted into malls.

 

National capital region (NCR)

Delhi and NCR are like head and shoulders of other Indian cities in terms of number of shopping malls and organised retailers. Since 2003, their shopping mall stocks have increased remarkably and have significant projects in the pipeline. Competition within NCR and Delhi will intensify as supply grows and there is a possible risk of saturation in some market segments by the end of the current year.

At present, total mall stock stands at 82 lakh sq.ft of which 26 lakh sq.ft is within Delhi. Most stock, however, is concentrated in the main suburban regions of Gurgaon (at 26 lakh sq.ft), Ghaziabad (12 lakh sq.ft) and Noida (11 lakh sq.ft).

With a very large number of malls in the pipeline, the NCR will continue to lead India’s organised retail market. Mall stock could potentially go up to 220 lakch sq.ft by 2008-09.

 

Prime retail:

Rental values across the NCR market remained stable this quarter. The rental values recorded for retail space in the city during the quarter for prime mall space in Delhi ranged over Rs 350 - 400 per sq.ft per month. On the other hand, average rental values for Gurgaon and Noida malls ranged over Rs 275 – 300 per sq.ft per month while for Ghaziabad and Faridabad malls, these fall in the range of Rs 150 - 200 per sq ft per month.

High streets, still, command the highest rentals. Connaught Place, the CBD of the NCR, commands rental values as high as Rs 425 to 1,025 per sq.ft per month. The South Extension and GK markets have attracted various international high-end retail chains. Rentals ranged from Rs 750 – 1,000 per sq.ft per month in South Extension, while these were Rs 750 – 1,500 per sq.ft per month in GK.

 

High-growth cities

A small group of cities have, over the past year, entered a high growth phase. They include cities with substantial consumer spending power (such as Ludhiana), India’s most important tourist city (Jaipur) and rapidly growing IT hubs (such as Chandigarh). These high growth cities, mainly located in northern India, are perceived by retailers as the ‘next retail destinations’. Chandigarh, Ludhiana and Jaipur lead the pack, characterised by high levels of shopping mall development and significant retailer interest.

It is Gurgaon that has initiated organised retail boom in Delhi and NCR in the form of malls. Major retail brand presence is along MG Road in Gurgaon and now it has started spreading across Gurgaon, Sohna Road, DLF Phase V are next in the row. Concept of specialty malls was first introduced in Gurgaon. A few malls such as The Gold Souk have already come up and this mall houses around 70 retailers. Another mall, The Wedding mall, is being built on Sohna Road, which will house everything from trousseau to event managers and jewellery.

In Noida, sector 18 is the hub of retail activity. Besides the 3.5 lakh sq.ft Centerstage Mall, which is now operational, the Unitech Entertainment city, to be operational soon, is likely to give it immense bump in terms of footfall. Presence of retail giants like Benetton, adidas, McDonald's, Papa Jones, Madura Garment, Bata, Provouge, Levi's and Reebok makes it imperative for other brands to set up their base at the same place.

Chandigarh

Chandigarh is well known for its meticulous city planning and is neighboured by Mohali and Panchkula that form the suburban regions of the city. The city is witnessing a rise in real estate market activity with increased interest from Essel Group, DLF and Parsvnath. It is believed that around 80 lakh sq.ft of retail mall space across 14 malls are expected to be operational in Chandigarh by 2010. The city was developed as a large mixed-development township where the majority of retailers operate out of shops in the ground floors of commercial office buildings in sectors like 17, 8 and 9, which are now transformed into leading high-street locations of the city. Traditionally, sectors 15, 17, 18 and 22 are popular for their high-street retailing.

However, the concept of retailing is changing here. The advent of organised retailing has changed the real estate profile of Chandigarh. Presently, the city has small-time shopping arcades like V3S Mall, Mega Mall and City Mart. Besides this, real estate developer Realtech group’s 2.5 lakh sq.ft City Emporio Mall, close to Tribune chowk, will be operational within this year.

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