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Saturday, July 21, 2018

High rentals,low sales: Retail chains on way out

With the global meltdown affecting the business of retailers,high rentals for their stores in Chandigarh are forcing the loss-making multi-specialty retail chains to move out of the city.

Written by RituSharma | Chandigarh | Published: March 28, 2009 12:36:42 am

With the global meltdown affecting the business of retailers,high rentals for their stores in Chandigarh are forcing the loss-making multi-specialty retail chains to move out of the city. In an exception to the realty slump witnessed throughout the country due to the slowdown,Chandigarh continues to rule the entire region when it comes to commercial rentals.

As a result,while many retail outlets have already downed shutters,all plans to open new stores have been shelved. The companies have redrafted their expansion plans by shifting business to suburban and rural areas,hoping to breakeven and earn profits.

“There is limited supply in Chandigarh with almost no option available for sale and purchase in flourishing sectors like Sector 17,Chandigarh. Hardly any owner is ready to sell his unit. A showroom can easily fetch even Rs 40 crore,” said real estate consultant Mangat Rai Baboota.

6Ten,a Kolkata-based national store chain owned by REI Agro Limited that opened with more than a 100 outlets in the tricity a year ago,is left with only 28 at present — 11 in Panchkula and 17 in Chandigarh and Mohali. Though the company has plans to expand its operations in the region,the tricity is not on its map any more.

It is now focusing on the suburban and rural areas of Punjab,Haryana and Himachal Pradesh.

“Chandigarh is the most expensive city in the entire northern region as far as commercial rentals are concerned. The prevailing rentals are way higher than the actual value of the property. When we compare the profits earned by our stores in Chandigarh with those in Faridabad or even Gurgaon,the figures don’t match up to the exorbitant rentals,” said Rajesh Sharma,the zonal in-charge of Haryana and Himachal Pradesh.

Of the two stores recently shut down in Chandigarh,one was in Sector 46,a location with “low viability and proximity” where the company was paying a rent of Rs 1 lakh per month for a space measuring around 1,000 sq ft,as compared to Rs 80,000 in Panchkula’s Sector 20,which is a location with “higher viability and proximity”.

“While the rent in Himachal or other states for around 1,700 sq ft is Rs 20,000 per month,the sales reported are above Rs 30,000 per day. We requested the property owners in Chandigarh to reduce the rentals by 25-40 per cent so that we can restart our operations,but to no avail,” said Rajesh.

Another multi-specialty retail chain,Vishal Mega Mart,which has only one store in Chandigarh,too,is facing loss of business. The Delhi-based company with a total of 180 stores across the country has no plan to expand its operations in the city in the near future.

The company is paying Rs 3 lakh per month for the store in Sector 5,which has a total area of 25,000 sq ft with three floors and a basement.

“The sales have been affected by the downturn. Especially,corporate buying has reduced,” said store manager Rakesh Singh.

The retail space in the malls in the tricity,too,fails to find takers. The only footfall the malls are generating is through multiplexes.

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