Mr Shivram Murti, Chief Operating Officer of More (the retail arm of Aditya Birla Retail), feels that the benefit will be more for larger formats such as hypermarts. "With regard to the smaller formats such as supermarkets, the industry may not get any benefit. As these stores are located on high-streets or busy areas, the prices continue to be competitive. As a variety of players, such as banks and other retailers, compete for small chunks of space, the prices continue to be higher," he explains.

The cost of rentals has become a major burden on the retailers, particularly in the organised sector, impacting their bottom lines. The retail industry for long has been arguing for a correction in the prices of commercial spaces, keeping in view the wafer-thin margins in the stiff competition. However, Mr Anjaneyulu Kakkera, Chairman of Vah Magna Retail, who founded Trinethra retail malls ( subsequently acquired by Aditya Birla Retail), feels that the sector is yet to see the impact. Anyway, the falling real-estate prices means nothing to major players, with almost 75 per cent of all their expansion already implemented.

"Almost all the major players have set up their malls in all metros. They must have already entered into certain agreements with the developers. So, the present fall might not be of any help to them," he reasons.

Wait and watch
Mr Girish Malpani, Chief Executive Officer of the Maheshwari group, says the impact (of falling prices) has just begun. "But the actual deals will happen now, in the next three-four months. People (retailers) prefer to wait and watch as the prices begin to fall further. They expect a better bargain," he observes. The group recently tied up with the global hospitality major Fairmont Hotels and Resorts for developing a 350-room hotel in Hyderabad. A typical sq.ft rental rate for retailers at the swanky Banjara Hills (Hyderabad) area is pegged in the range of Rs 150-250 a month. It is lower in places such as Abids and Himayatnagar (Rs 80-100).

According to him, the rentals also depend on the property. "If it is a standalone property, it could cost less. In malls, it is more because of the value addition (escalators, parking) and cost of the project. The anchor occupant (who takes bulk space) gets the space at a lesser rate," he says.

Slowdown impact
The retail sector, which seeks to benefit out of the cooling-off effect in real-estate prices, is itself feeling the heat of the slowdown in the economy. Mr Anand Reddy, Executive Director of PBEL property developers, says the high costs of rentals will put severe pressure on return on investments. Pointing out that the return on investments in retail globally is in the region of 8-10 per cent, he says it could be much lesser in India because of the huge rentals. Several retailers have slowed down their expansion plans, while others have significantly cut down on their advertisement spending. That, however, is a different story.