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Premium Indian mall rents rise

Premium Indian mall rents have risen “significantly” in the first six months of 2016.

A report by property consultant CBRE South Asia shows rental rates at India’s more up-market shopping centres were led by major cosmopolitan mall clusters Noida (rising by 45 per cent), Gurgaon (by 30.8 per cent), Vasant Kunj (28.6 per cent), and East Bangalore (10.5 per cent).

By region, rental rates have increased in the National Capital Region centered around Delhi (Vasant Kunj, Saket, and Gurgaon), Mumbai (Kurla, Ghatkopar and Lower Parel), and Bangalore (Whitefield, Ulsoor, and areas in West Bangalore).

The steep rise in rent is due to the robust demand led by international retailers, and rapid expansion plans of established retailers. For example, during the first half of 2016, Swedish clothing retailer H&M, US clothing company Gap, Japanese lingerie brand Wacoal, and Dutch brand Hunkemoller opened new stores in India, while the more established retail stores – Shoppers Stop, Levi’s, Puma, Pepe Jeans, Fabindia, Gap, Haagen-Dazs, and Mebaz – further expanded their outlets.

A gap between the demand and supply is also to blame, as building malls is a capital intensive activity and completion of projects may take up four to six years.

However, the rise in rent and demand is restricted to premium markets. In another report, by property consultant Jones Lang LaSalle (JLL) India, findings indicate that tier 2 cities and even average and poor malls in tier 1 cities, continue to struggle with high vacancy rates, which began with the global financial crisis of 2008. Poor consumer and retailer sentiment has also prompted several mall developers to shelve or defer new projects across the country.

JLL estimates that rental rates in premium markets will stay constant or increase till the gap between demand and supply gets bridged in about five to seven years.

  • This article was first published by Dezan Shira & Associates which, since its establishment in 1992, has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll, and audit matters. Dezan Shira & Associates is a full-service consultancy with offices across China, Hong Kong, India, and ASEAN.

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