The malling of Bangalore

The rise of a new middle class in India's Silicon Valley has led to a demand for western-style shopping malls. Fortune's Sufia Tippu breaks ground.

By Sufia Tippu, Fortune Magazine

(Fortune Magazine) -- Get ready for the malling of Bangalore.

In June an Indian developer based in Oman is expected to break ground on a two-million-square-foot shopping complex in downtown Bangalore that will be India's largest mall. Nine other malls are on the drawing board for the epicenter of India's tech revolution, including projects by liquor baron Vijay Mallya, retailer Pantaloon and the Tata Group, India's largest business conglomerate.

Master builder Menon at a construction site in Kerala
Infosys U. Infosys U. Infosys U.
At the Taj Mahal of training centers, a fast-growing Indian outsourcing company lavishes attention on its recruits.

What's driving the surge in mall projects in Bangalore is the rise of a new middle class. Many have been exposed to shopping malls in the West. "Disposable income is rising," says P.N.C. Menon, chairman of Sobha Developers, which is spending $250 million on Bangalore's biggest mall, scheduled to open in 2009.

The Sobha Global Mall, as Menon's shopping paradise will be called, features stores built around a skylighted atrium on 16 acres, a 13-screen multiplex, food courts, a rooftop disco, a 300-room hotel tower and enough parking for 3,400 cars. It is being built not in Bangalore's newer, more upmarket neighborhoods but in the center of the city, a kilometer from the bustling train station.

"I don't want this to be merely the largest shopping mall in India," says Menon, 59, who established his reputation for quality by building palaces in the Gulf and most of the California-style campus for Infosys (Charts), the Bangalore tech giant. "This should be a one-of-a-kind experience for the shopper - never to be forgotten, always to be relived and to come back to again and again."

Although relatively small by global and even regional standards - the South China Mall in Dongguan, China, with 7.1 million square feet, is the largest in the world - the Sobha Global Mall promises to set new standards in a country that already has 100 malls of more than 200,000 square feet. That number is expected to increase to 350 in the next two years as retailers, both domestic and foreign, seek to bulk up their operations in India.

Wal-Mart (Charts, Fortune 500) recently inked a deal with India's Bharti to open a chain of superstores, and Reliance Industries is spending $5 billion to expand into the retail sector. "There are so many global brands, such as Burger King (Charts) to Taco Bell to Chili's, waiting to enter India," says Bikash Kumar, managing director of Integrated Retail, an Indian retail and technology-services company. "To break even, stores have to see top-line sales of $1 a square foot a day. They believe they can achieve this here in India."

Not everyone is so upbeat. "Building the largest mall doesn't necessarily mean it will be successful," says Atul Mahajan, principal consultant at Technopak, a management consultancy in Bangalore. "There are so many huge malls that are almost empty in China. You need a right mix of tenants for it to be successful."

Menon won't reveal which, if any, retailers have committed to opening stores in his mall. All he will say is that they will include some of the world's best-known names in retail and perhaps his own branded chain of home stores, which he is launching soon. But judging from his previous work, he won't have any trouble attracting quality merchants.

A native of Kerala, in southern India, Menon moved to Oman when he was 24 to redo the interior of a photographer's small studio. He went on to make a fortune building luxury hotels and resorts in Dubai, Oman, Egypt and France and started taking on projects in India only a decade ago.

Sobha is the only company in India and possibly the world that makes almost everything that goes into its buildings - from concrete blocks to electrical and plumbing fittings to doors and windows and metalwork parts made at its Bangalore factory. "It is this backward integration," Menon says, "that gives us absolute control over quality at every level."

That attention to quality impressed Narayana Murthy, chairman and chief mentor of Infosys. "Menon is the first builder with a world-class quality that I have come across in India," says Murthy, who hired him to construct a number of architecturally distinctive buildings on the company's Bangalore campus. "He is an artist." Menon has also built Hewlett-Packard's (Charts, Fortune 500) training center in Bangalore and is putting up a new factory for Dell (Charts, Fortune 500) in Chennai.

Will he be able to translate his artistry to the world of retail? That depends, says N.G.N. Puranik, director of Enam Financial Consultants in Bangalore. "If India is able to sustain a GDP growth rate of 8 percent, the demand would definitely be there," Puranik says. "But they have to invest in the back-end infrastructure - supply chain, logistics and warehousing - not just the front end."

Menon, whose quiet manner belies his obsession for perfection, doesn't seem the least bit worried. "India," he says, "will never have a deficit of shoppers."  Top of page