Developers in profit-sharing pact with retailers

Developers in profit-sharing pact with retailers
The Financial Express, July 20, 2009, Page 4

Mona Mehta, Mumbai

Competition has started hotting up in the real estate industry with realty developers entering into new revenue sharing agreements with organised retailers in Q2 2009-10. This is also apart from developers launching innovative concepts in retailing so that retailers are able to share the profit that they have earned from the property.

According to Navin Raheja, managing director, Raheja Developers, the firm has recently signed new revenue sharing deals with Ginger Hotels (a Tata Enterprise), Café Coffee Day, Subway and Yo China. We have recently signed the agreements with many retailers for our commercial properties at Manesar, Gurgaon and Panipat.”

“In the present market scenario, retailers are a little hesitant to enter into fix lease amount as the sales are low,” said Raheja. “The rationale behind this move is that the developer will get better value if the property is doing good and retailer s will be happy to share the profit that they have earned from the property. Second, these kinds of arrangements are win-win situation for both the parties. The developer will also focus on increasing the footfall in the mall and retailer will also not be under pressure to pay the fixed overhead. We are focusing on a revenue sharing model for all our commercial/ retail properties that the company is developing or planning to develop,” added Raheja

In India, over 600 malls will be ready to be sold or leased and around Rs 30,000 crore have already been invested in the malls, although these are not taken by retailers due to higher rents and common area maintenance (CAM) cost.

Entertainment World Development Private Limited, an Indore-based leading real estate group is in advanced stages of entering revenue sharing agreement in Nanded for our upcoming mall apart from fix rental agreement with Big Bazaar and Pantaloon in Indore, Manish Kalani, managing director, Entertainment World Development Private Limited, said. According to Kalani, “Besides, as part of the revenue sharing agreement, we are evaluating plans to bring in innovative concepts in our upcoming retail malls such as a seamless mall within a mall.”

As part of the revenue sharing pact, seamless mall provides benefits to emerging brands in terms of no rent, no CAM and no electricity charges. Seamless mall functions as a retail enabler, believes industry experts.