Many investors are in dilemma with regards to the timing of the purchase of retail space. There is an obvious choice between making investment at the time when the construction is yet to start and at the time when the mall is getting ready for completion. Subhash Lakhotia advocates that one should book the stall in an upcoming mall before the construction starts. Another investment mantra, according to Lakhotia is not to give the outlet on rent till the mall is complete. "This way one can get substantial return of 15-16 percent besides ensuring high capital appreciation.

Pit falls

Sanjay Sachdeva of APIL also advises to invest at the initial stage. "It makes a lot of sense as investor gets ROI as high as 11-12 percent and the value of property works out to be cheaper. But at the same time he cautions about the possible pitfalls.

There are cases where mall developers start leasing out retail space to brands even before the constructions starts. The space is leased out on the basis of LOI and against one-month advance cheque. "And as the mall developers start high pitched marketing campaign, investors get taken in; little realizing that space is not leased out to brand which can withdraw any time. Moreover, since government clearances take long time malls generally overshoot their completion deadline. As such not only investor's money is blocked, there is even fear of brand shifting to other property. So the safeguard against these pitfalls is to select a mall developer with good reputation and track record of completing projects in time. Also ensure that retail space is leased out to a brand", advises Sachdeva. Menon further adds that for deciding entry strategy, one must take advice from professional real estate brokerage houses and consulting agencies with retail real estate and brand expertise.

Future prospects

What does future holds for retail real estate investors? Given a scenario of robust future supply in malls, would the rental yields manage to hold out? Shubrahnshu Pani is quite upbeat about the future of investing in malls. "Properly planned and executed properties will command premium prices in spite of market pressures. And as the retail boom is here to stay, investors can continue to capitalize on it in the coming years.

                                                                                                           Courtesy realty plus