Pantaloon Retail India Ltd, the country’s biggest publicly traded retailer, said malls were waiving rents and offering to pay for interior decoration because excess supply and slowing economic growth eroded demand.
Developers are ready to “pay us for coming into the malls,” Kishore Biyani, founder and managing director of Pantaloon, said in a telephone interview from Mumbai, where the company is based. “They need anchor clients like us to bring in other clients.”
India’s shopping centres are facing excess supply and slowing demand after mall rents almost doubled in two years. Malls in India’s top eight cities have about 20 per cent of their total 40 million square feet (3.7 million square metres) of space vacant, according to real estate broker Cushman & Wakefield Inc.
Malls are offering rent moratoriums for six months and free interior fixtures, Biyani said. The company, which soon plans to sign such agreements with mall developers, is also scrutinising its own spending and costs more carefully.
“Every proposal and capital expenditure is being carefully examined and we are not getting into anything that may be marginal,” Biyani said.
Retail rents rose sharply in the past two years as Reliance Industries Ltd, the country’s most valuable company, and Bharti Group, which is India’s biggest mobile-phone operator, started running stores.
India’s $1.2-trillion economy, Asia’s third-largest, expanded 7.9 per cent in the three months ended June, the weakest pace since the last quarter of 2004.
It’s “premature” to say whether and how much India will be affected by the credit crisis as “there's no clarity” on how that will affect consumer behaviour in India, Biyani said.
Consumer spending and same-store sales will continue to grow and Pantaloon will stick to its target of adding as much as 16 million square feet of store space in the 12 months ending June next year, he said.
Pantaloon Retail said same-store sales in August rose 13 per cent to Rs 5.24 billion from a year earlier. Total sales in August rose 53 per cent to rs 7.17 billion, according to the company.
