In the great malling of India, few developers are as well equipped to talk about retail success as Irfan Razack, the man behind Bangalore’s The Forum mall.
Razack heads the Prestige Group, built The Forum in 2004 and while there may be bigger and glitzier malls across India, it continues to set the retail standard, voted India’s best shopping centre in 2008 and best mall in 2007.
Razack said,“It is not just about putting up a building”. Further he added, “Developers don’t always understand that retailers have to have their cash registers ringing. So you need sustainable rents and the right mix of tenants”.
It helps, too, to have the right timing. Three straight years of 9% economic growth from 2005 to 2007 gave a huge boost to Indian consumer confidence, though the gloss is coming off rapidly in 2008 as the economy cools and inflation rises.
Still, shopping malls of all shapes, sizes and themes – be it gold, electronics, cars or weddings – continue to dazzle property developers who have hitched their star to India’s consumer boom.
Favourable demographics – more than half of India’s population is under 25 – along with rising incomes and the ready availability of credit cards have created what looks like a consumer sweet-spot for the mall crowd.
The air-conditioned shopping centre, replete with designer brands, cinema multiplex, food courts and multi-level car-parking, is a new phenomenon for India. Just a decade ago, there were no real malls, and modern or organised retail had a miniscule 3% share of consumer spending.
By 2006, when India’s total retail market was worth $US330 billion ($375.5 billion), there were 90 malls across seven cities and modern retail was on a roll.
Research by the India Retail Forum last year estimated that mall numbers almost doubled in 2007 to 179 operational malls. By 2010, that figure could jump to 412, and reach 715 malls by 2015, covering 350 million square feet of retail space. By then, Indian retail spending will top $US700 billion, and modern retail’s share will be around 20%.
But real estate experts believe the quality of planning, construction and mix of stores in many of India’s malls is poor. “We assess that over 90 per cent of the current and planned shopping mall stock falls below international standards in terms of specification and design,” property agency Jones Lang LaSalle Meghraj noted last year.
And 2009 is widely seen as the crunch year for mall developers, when the weak will go to the wall.
None of this bothers Razack. He has nine malls in the works – in cities such as Chennai, Mysore, Cochin, Mangalore, Hyderabad and three in his home town of Bangalore.
One of his biggest developments is in UB City, a massive commercial and retail complex that Prestige Group is building in partnership with the flamboyant liquor and aviation tycoon, Vijay Mallya, on the site of one of Mallya’s old breweries in the heart of Bangalore.
UB City includes a three-level shopping arcade that Razack expects will be fully operational by October, featuring brands such as Louis Vuitton, Dunhill, Tiffany, Armani, Estee Lauder, Christofle and Rosenthal.
“It is positioned totally as a luxury mall,” says Razack. He says this centre, along with rival developer DLF’s Emporio Mall in Delhi, will dictate the speed of luxury expansion in India. “These malls should succeed. I am certain the buying power is there,” he says.
Razack is a great believer in Bangalore, even though he says its infrastructure falls short of the expectations that come with its status as India’s global technology city. “We should always benchmark to the best in the world,” he says.
Part of the problem is that Bangalore has grown from a city of 1.5 million in 1970 to more than 7 million today. It rose to prominence in the 1990s as the global IT boom gathered speed, and home-grown companies such as Infosys and Wipro emerged as cost-effective, high quality providers of IT-enabled services. But the city’s infrastructure across power, transport and water services is woefully inadequate.
Razack said, “I was born and bred in Bangalore, so I can feel the change”. Further he said, “Once, this was a sleepy old retirees’ town. Now, it is bursting at the seams. It is blessed with a good climate, hospitable people, good social infrastructure in terms of hospitals and schools. Now, it has good housing and office space. But infrastructure is the key. There is no doubt it is falling short”.
Though Bangalore’s star has waned a little as cities such as Chennai and Hyderabad expand their reputations as technology centres, Razack is upbeat about his city’s future: “The need for IT and BPO (business process outsourcing) is not receding in business, it only keeps increasing. It is more and more an integral part of our lives”.