Too much slowdown, need more time, says company.
Prozone, the mall development joint venture between apparel retailer Provogue and the UK’s Liberty International, has deferred its expansion plans.
The company had proposed to launch malls in three cities in two to three years but it now feels the recession-hit retail sector needs more time to pick up.
The company was planning to launch malls in Indore, Nagpur and Jaipur this year. It is now only focusing on opening a mall at Aurangabad in Maharashtra by the end of next year.
“Lack of growth in the retail market has forced us to defer these planned malls for the next two to three years,” said Nicholas St. Johnston, chief operating officer, Prozone Liberty International.
When Liberty invested Rs 202.5 crore for 25 per cent stake in Prozone, the total investment in the six mall projects, including those at Lucknow and Coimbatore, was pegged at Rs 1,000 crore, with Rs 400 crore as equity and Rs 600 crore debt. Later, the total investment was revised to Rs 2,000 crore, of which Rs 700 crore was planned as equity and Rs 1,300 crore as debt.
More From This Section
Almost all retailers such as the Future group and Reliance Retail have scaled down their plans as weak economic and job markets force shoppers to defer purchases and downtrade. The Future group, which was targeting a retail space of 30 million sq ft by financial year 2011, now expects to have the space only by FY2013.
Reliance Retail has closed 30 stores in the past year and Aditya Birla’s More has shut 45. “Retailers opened shops without data to support their expansion. Now, they are facing the reality,” added Johnston.
The company is planning to develop a total of 10 malls in the next 10 years. In April last year, Triangle India Real Estate Fund, promoted by South Africa’s Old Mutual Property Investments, picked up 27 per cent stake in the special purpose vehicle (SPV) of Prozone Liberty for nearly Rs 457 crore. The SPV held stake in the four projects at Aurangabad, Indore, Nagpur and Jaipur.