If one could do a little mind scraping, you will realise that 90% of the “100% Leased Model” Malls have been successful & almost 90% of the “Strata Sold” Malls have been a failure or better so, just make a list of top successful 100 Malls in anywhere in the world, and one common thing with them will be that they all are a “100% Leased Model" Mall. !!!

Shopping Malls in India have been a critical component of urban retail infrastructure over the past two decades. However, not all Malls exhibit the same performance or sustainability. Among the structural variables that influence long-term success is the ownership and operating model; primarily the strata-sold (multiple ownership) model versus the 100% lease (single ownership) model. While initial market volumes in India featured a dominance of strata ownership to fund rapid construction, the evolving retail ecosystem is increasingly validating leaner, professionally managed lease-driven assets. This article analyses both models rigorously, comparing their operational dynamics, performance outcomes, risks, and suitability for stakeholders including Builders, developers, investors, and retailers.

Understanding the Models

Strata-Sold Model: In a strata-sold or strata-titled Mall, the Mall Builder divides the built retail space into individual units or “strata lots” which are sold to multiple investors; typically high-net-worth individuals, retail investors, or institutions. Each unit becomes a separate property owned by its buyer/owner, who can independently lease it to a retailer or occupy it. This model is somewhat analogous to residential condominium ownership but applied to commercial Mall spaces.

100% Lease Model: In contrast, a 100% lease model features a single ownership entity; often the Mall Developer or an institutional investor; that retains ownership of the entire Mall and leases out space to tenants. All leasing, tenant mix decisions, marketing, and facilities management are centrally controlled by a professional Mall management team. This is the dominant model in institutional-grade Malls globally.

(To find the right definition of the word “Mall”, refer the definition of a “Mall” from the Book “The Mechanics of Malls”)

Comparative Analysis

1.     Design & Positioning

Strata-Sold

Ticket size Planning: Mall Builders plan the layout or the size of the stores based on the ticket size they can sell it to investor. Smaller the units, better the returns for the Mall builder.

Poor Layout: Since the unit/shops have to be sold, the planning takes a backstage, many stores are planned with exclusive entrances, to sell at a higher price.

Retailers woes: Retailers need to compromise on the store size, or talk to multiple investors to join their stores to operate, with a high risk of inter-investor/owner conflicts.

Lease Model

Retail Size Planning: The Mall is designed to accommodate large anchors & inline stores, in a scientifica manner, creating a uniformed plan & circulation..

Perfect Layout: The Mall is laid out in a perfect manner, with proper vertical & horizontal circulation, with scientific zoning to house the right categories at the right place.

Dynamic Rentals: The Mall design & circulation helps the Mall developer to have dynamic renatals, based on the brand and category, helping each of them to survive.

2.    Ownership and Governance

Strata-Sold

Fragmented ownership: Multiple owners lead to decentralised decision-making. Individual investors have rights over their units and expectations for independent leasing decisions without central coordination. Let;s get one thing clear, there is nothing called “Rights to Lease” with the Mall Builder. That is just a marketing jargon !!!

Absence of unified strategy: Without a cohesive governance structure, collective decisions on common areas, marketing budgets, and tenant strategy are difficult to effect.

Lease Model

Centralised control: A professional management team retains authority over leasing, tenant mix, design standards, and consumer experience strategy, enabling responsiveness to market trends.

Efficient governance: A single decision-making authority avoids delays in agreeing on upgrades, maintenance, or repositioning of the asset.

3.    Tenant Mix and Retailer Ecosystem

Strata-Sold

Chaotic tenant mix: Individual owners typically lease to whoever pays without category discretion. This results in repetitive or low-quality tenants clustering together, eroding the curated environment that modern shoppers expect.

Lower attraction for flagship brands: Large national and international retailers often avoid Malls where the tenancy lacks cohesion or quality control.

Lease Model

Curated tenant mix: The Mall Developer can align brands to a comprehensive retail strategy, zoning categories (F&B, fashion, entertainment) to encourage higher footfalls and cross-shopping. The complete leasing strategy and implementation of leasing is completely controlled by the Mall Developer & doesn’t have to succumb to investor’s whims & fancies.

Anchor tenant leverage: Professional leasing attracts strong anchor tenants (multiplexes, large format brands) that help drive consistent traffic and influence higher average sales per square foot. The Mall Developer can also subsidise the right anchors, to ensure constant footfalls in the Mall.

4.    Operational Efficiency

Strata-Sold

Maintenance and upkeep challenges: Multiple owners may disagree on funding common area maintenance (CAM), leading to deterioration of amenities such as escalators, HVAC, or cleanliness. Most of strata sold Malls are in pathetic condition, with regards to the maintenance of the common areas & infrasructure.

Inconsistent standards: Retail units maintained to different standards undermine the overall brand proposition of the Mall.

Lease Model

Professional Mall management: A dedicated team ensures high operational standards, coordinated maintenance schedules, and swift resolution of facility issues. The Mall developer look at constantly enhancing the asset value by maintaining the Mall.

Accountability and quality: Consistent standards enhance customer experience and reinforce brand perception.

5.    Marketing and Brand Building

Strata-Sold

Lack of joint marketing: Collective marketing initiatives (festive campaigns, loyalty programs, events) are rare because owners are unwilling or unable to co-fund such activities.

Retailer burden: Individual tenants must self-market, eroding their margins and reducing the Mall’s competitive visibility.

Lease Model

Centralised marketing funds: Mall Developers regularly invest in promotions, brand tie-ups, and experience-driven footfall strategies that benefit all tenants.

Stronger customer engagement: Events and campaigns build lasting shopper loyalty and repeat visits.

6.    Investment Yield and Risk

Strata-Sold

Initial liquidity for Mall Builders: Mall Builders recover capital quickly by selling units, which helps fund construction but removes long-term revenue potential. They treat “Mall” as a real estate business.

Investor yield variability: Rental income depends on tenant occupancy and quality; often yields are modest and resale liquidity is weak. In some cases, they rentals are too high, as the investors care only about the rent income, without looking at the category or brand.

Asset deterioration risk: Strata sold Malls historically see higher vacancy and “ghost Mall” phenomena due to weak management and poor shopper pull.

Weak Financial Transparency: Many investors opt for cash rentals, to save taxes.

Lease Model

Long-term revenue streams: Developers benefit from regular recurring lease income and asset value appreciation.

Institutional appeal: Lease-driven Malls in India attract significant institutional investment, including REIT acquisitions by major players such as Nexus Select Trust, which signals confidence in professional Mall assets.

Better financial transparency: Lease contracts and revenue sharing models ensure predictable cash flows.

7.    Consumer Experience and Footfall

Strata-Sold

Sub-optimal consumer journeys: Poor category zoning and inconsistent tenant quality diminish repeat visitation, impacting overall footfalls.

Brand dilution: Presence of low-value or unrelated tenants (e.g., mobile accessory shops clustered randomly) undermines premium positioning.

Lease Model

Enhanced shopper experience: Professional curated environments align with modern Indian consumer expectations of convenience, aesthetics, and entertainment.

Higher traffic density: Strategic mix of retail, F&B, and lifestyle experiences fosters higher dwell times and conversion.

Strategic Implications for Stakeholders

For Mall Builders

Strata sold Malls provide instant gratification of profits to the Mall builders, sometimes even before they start the construction. They get funded by the investor to build the Mall. But the mall builder loses out on the ownership of the property, though it may carry their name. No intuitional buyer will look at this option, even is a part of the mall is continued to be held by the Builder.

For Mall Developers

100% Leased mall generates a sturdy and regular rental incomes, with the upside of revenue share and asset enhancement to their advantage. The value of the Mall keeps increasing year on year surely higher than inflation & escalation.

For Retailers

Strata Malls may be risky due to variable footfall and weak shared services; retailers should conduct exhaustive due diligence before committing.

Lease models provide stability, predictable Mall management, and marketing support—enhancing sales performance.

For Investors (Shop Owners)

Strata ownership may appeal to investors seeking passive property stakes, but risks include illiquidity, uneven tenant performance, and lack of professional asset management.

Conclusion

The comparative evidence underscores that 100% lease model Malls generally outperform strata-sold Malls in the Indian context. While strata sales emerged as a financing workaround for mall builders, they introduce fragmentation that handicaps unified management, tenant curation, marketing, and customer experience—core determinants of a Mall’s long-term viability and profitability.

In contrast, lease-based Malls align with global shopping centre best practices: centralised governance, curated tenant ecosystems, professional facilities and marketing management, and sustainable financial models. These attributes enhance footfall, tenant profitability, and capital value—making them the preferred model for institutional investors and progressive Mall developers.

For the Indian retail real estate landscape to evolve from quantity to quality, the industry must gravitate toward professionally managed lease-driven formats, supported by institutional capital and consumer-centric design thinking. Only then can Malls continue to thrive as vibrant hubs of urban commerce and social interaction.

One wonders that, most smart retailers know the comparison of the “Strata Sold Malls” and 100% leased Mall, yet we see lot of reputed retailers signing stores in “Strata Sold Malls” and then shutting them down after a few years of burning cash. Why would any reputed retail house, allow their stores to be opened in a “Strata Sold Mall”, even after 2 decades of learnings. Several reports indicate that a majority of strata-sold Malls suffer operational and performance challenges, often leading to low occupancy and eventual decline.

Time to introspect !!!