Mall developers bet big on smaller cities as demand slows in metros

ANEEKA CHATTERJEE & GULVEEN AULAKH Bengaluru/New Delhi, 13 April

Tier-II, III and IV cities such as Ahmedabad, Surat, Chandigarh, Jaipur, Coimbatore, Tirur, Perinthalmanna, Varanasi, Gorakhpur, Vijayawada, Amravati and Kanpur will be the next destination for mall developers. This comes as retail brands look to capture the rising consumption in these markets amid a slowdown in the Tier-I segment.

Lulu Shopping Malls, Nexus Select Trust, Phoenix Mall, Brigade Group, and others are scouting for malls that can be redeveloped or better run.

Sector watchers have identified key reasons behind this spurt, beyond the consumption shift.

Local developers in Tier-II and III cities are building smaller malls often leveraging family-owned land or expanding into retail. Institutional and listed mall players are now aggressively entering these cities.

“There hasbeen an increase in leading mall developers expanding into Tier 1T and I1I cities. This trend is being driven by a combination of rising income levels, improving urban infrastructure, and aspirational = consumption behaviour in these markets,” said Saurabh Shatdal, managing director (MD), capital markets & head-retail India, Cushman & Wakefield. The

. EXPANSION LAYOUT

® Lulu Shopping Malls is set to open

new mini malls in Tirur and Perinthalmanna by 2025

® Phoenix Mills has acquired 7.22 acres

in Surat to develop a 1 mn sq ft mall

| K Raheja Corp plans to construct a

6,00,000 sq ft mall in Vizag

m |nstitutional mall players like Nexus

Select Trust are aggressively entering smaller cities

expansion is also being driven by land availability at competitive rates, underpenetration of premium malls, and a growing presence of both domestic and international retail brands.

Notable developments include K Raheja’s plans to build a 600,000 square feet mall in Vizag, Phoenix Mills' acquisition of a 7.22-acre land parcel in Surat for a 1 million square feet project, and Lulu Mall'supcoming launches in cities like Lucknow, Ahmedabad, Vizag, and several towns in Uttar Pradesh.

Lulu Group has focused on smallformat malls tailored to local needs.

m Brigade Group is expanding beyond

Tier 1 markets like Mysuru, Kochi, and Trivandrum

Shibu Philips, director, said, “We identified the potential of smaller markets early on, launching our first mini mall in 2019 in Triprayar, Kerala. Building on this success, we are set to open similar malls in Tirur and Perinthalmanna by 2025 and are expanding in Uttar Pradesh. Upcoming malls will be seen in Varanasi, Gorakhpur, Vijayawada, Amravati, and Kanpur.” Brigade Group, which has a footprint in Mysuru, Kochi, and Thiruvananthapuram, is also moving beyond Tier-I cities.

Sunil Munshi, senior vice-president — retail, Brigade Group, said, “These

cities are experiencing growth and urbanisation, which makes them attractive to developers like us. Malls in smaller cities are offering experiential retail and hosting local events to drive repeat footfall.”

Anuj Kejriwal, MD and chiefexecutive officer (CEO) of retail at Anarock India, highlighted the dual-front expansion.

He said, “Local developers are building smaller malls, while institutional players like Nexus and Phoenix are entering these markets with large-scale malls of 800,000 to 2 million square feet. These disrupt and consolidate local retail ecosystems.”

The government’s 2023-24 household consumer expenditure survey showed a rise in discretionary spending, with increasing demand for durable goods, processed food and entertainment. The Union Budget 2025-26 has further added momentum by offering tax relief to the middle class, boosting disposable incomes and consumption in non-metro markets. With both demand and infrastructure aligning, mall developers are accelerating their footprint into emerging cities.

Blackstone-backed Nexus Select Trust, which runs 104 million sq ft of developed retail space across 18 malls, including the Select Citywalk mall in Delhi, expects non-metros to grow faster than metros.