Management of Indian shopping malls: Impact of the pattern of financing

Abstract

Shopping malls are fast becoming a central part of life in urban India. Demand projections for mall space in India are lucrative; however, the growth of malls in India over the last decade has suffered from issues such as the high cost of real estate and construction, poor infrastructure, a non-conducive policy framework, and the unavailability of professional expertise in mall development and management. This has resulted in undifferentiated malls, plummeting occupancy levels, and reduced profitability for tenants and malls. Most of these evils have their genesis in the inappropriate pattern of financing used by Indian mall developers. In the Indian scenario, funds for mall projects come from different sources and in different varieties. Funds are raised by selling the mall space to investors and speculators for quick recovery and rotation of funds. The mall is owned in a piecemeal manner by a number of stakeholders. Consequently many problems creep in. These include short-term orientation, distortions in zoning, disturbance of the overall concept of the mall and developer disinterest in promoting malls. All these vices convert the mall into just another ‘shopping complex’. To overcome this pattern, lessons ought to be learnt from the United States and other Western countries, where a healthy and steady inflow of pubic funds has kept the malls competitive. Major changes are needed in the Indian mall business in terms of a regulator for real estate, more inflow of public funds and increased transparency, so that this sector prospers in future.