Mall Rush?(India)

Crossroads was an instant success with everyone, including all the wrong people. Opened in 1999, the first and only mall in India's most cosmopolitan city, Mumbai, was named after its location at the nexus of tony neighborhoods. On weekends the throng of low-rent rubberneckers was driving away paying customers. So last summer the owners raised the bar. Just to enter the mall, customers had to display purchasing power in the form of a credit card or a mobile phone--or pay a $1.30 entry fee. Weekend traffic fell by half, to 30,000, before public outrage forced Crossroads to retract the proof of wealth requirement. "It has very, very upscale stores," says Vivek Mathur, associate director of management consultants KSA Technopak. "When people were buying expensive jewelry they didn't want riffraff looking over their shoulder."

Until recently, India had resisted the global advance of mass-market materialism and its most visible symbol, the American mall. The chain stores that anchor malls everywhere first appeared at the beginning of the 20th century in the United States and took 50 years to gain a 20 percent share of the market. Then they started taking off around the world. It took just the last 10 years for chain stores to seize an equally large foothold in Malaysia and Thailand (chart). India stood out as an island in this widening sea of malls, protected by red tape and a Gandhian tendency to shun the pursuit and display of wealth.

Today there are only three malls in India, and they offer a distinct twist on the usual retail palace. Shoppers are more likely to encounter swamis, saffron and homegrown labels like Weekender and Gabana than the familiar parade of global brands. But all that could change fast, as India lowers barriers against foreign labels in order to satisfy its commitments to the World Trade Organization. In a giant step this week, India will drop quotas on 714 imports, from freezers and color TVs to Scotch whisky. If developers are right, this could be the moment mall mania finally seizes India.

Just about every major Indian builder or industrialist is looking at malls. Plans are in the works for as many as 50 new malls over the next three years. Real-estate specialists Jones Lang LaSalle estimate 6 million square feet of mall space will open in major Indian urban areas. Even Mumbai, with stratospheric real-estate prices second only to Tokyo's, is expecting 2 million square feet in 12 malls and a sudden influx of Western brands. Mall developer Pradeep Seth predicts "a flood of foreign goods" after April 1.

Import quotas aren't the only barriers falling. Archaic urban zoning laws had divided cities into tiny plots, often subject to heated title disputes, which made it difficult for developers to buy a piece of land big enough for a mall. Now cities are relaxing the laws, and exorbitant real-estate prices are coming down. High-end incomes are rising 10 percent annually, and now top $2,800. In Mumbai, failing downtown textile mills are freeing up prime sites. Delhi's fast-growing satellite cities have plenty of spare land--and nine malls in development. Susil Dungarwal, head of the retailing division for residential and commercial builder the Hiranandani Group, predicts a ...