Soaring Real Estate Prices Force Zara to Close Flagship Mumbai Store
Global fashion giant Zara has shut down its flagship store in Mumbai's Hutatma Chowk due to unsustainable high rental costs, highlighting the growing challenge of India's overpriced real estate market.
Real EstateRetailZaraMumbaiBusinessReal Estate NewsFeb 25, 2025
The store, located in the heritage Ismail building and spanning 51,300 square feet, had been operational since May 2017.
Despite its prime location and a two-year restoration effort involving local architects and Zara’s in-house team, the store could not sustain operations under the weight of exorbitant rental costs.
According to Propstack, Zara had signed a 21-year lease for the property in April 2016, agreeing to a monthly rent of ₹2.25 crore with a ₹13.5 crore deposit.
The high rental expenses far outpaced the store's sales, making it financially unviable.
Business Standard reported that Zara's sales failed to keep up with the steep rental costs, ultimately leading to the store's closure.
The decision to close the Mumbai outlet comes at a time when India's real estate market is experiencing unprecedented price hikes.
Top investor Alok Jain highlighted the issue on social media, stating, “The high real estate prices in India are the biggest reason for our uncompetitiveness.
Factory, office, shop, residential—everything is overpriced versus purchasing power.
One can attribute some to unaccounted money but also to the unavailability of good supply.” Jain's remarks reflect a broader concern about the impact of high real estate costs on business sustainability and competitiveness in India.
Zara entered the Indian market in 2010 through a joint venture with the Tata Group.
Currently, the brand operates 23 stores across 12 cities, with a total income of ₹2,774.64 crore in FY24, up from ₹2,562.50 crore the previous year, as reported in Tata-owned Trent’s annual report.
The Inditex-Tata joint venture also includes another fashion brand, Massimo Dutti.
The closure of the Mumbai store is not just a setback for Zara but also a signal to other businesses operating in high-rent areas.
The high real estate costs are making it increasingly difficult for companies to maintain a foothold in prime locations, especially in major cities like Mumbai.
This trend is likely to continue unless there is a significant shift in the real estate market, either through increased supply or regulatory changes to control prices.
For Zara, the closure of the Mumbai store represents a strategic move to focus on more financially viable locations.
The brand will continue to operate in other Indian cities, where the cost structures may be more manageable.
However, the challenge of balancing high rents with sales performance remains a critical issue for the retail industry in India.
In the broader context, the situation highlights the need for a balanced approach to real estate development.
While prime locations offer significant brand visibility and foot traffic, the financial burden of high rents can outweigh the benefits.
For investors and developers, it may be time to reassess the value proposition of high-rent areas and explore more cost-effective alternatives that can sustain long-term business growth.
The closure of Zara's Mumbai store is a wake-up call for the real estate and retail sectors.
It underscores the importance of aligning rental prices with market demand and ensuring that the business environment remains conducive to growth and innovation.
Frequently Asked Questions
Why did Zara close its flagship store in Mumbai?
Zara closed its flagship store in Mumbai's Hutatma Chowk due to unsustainable high rental costs. Despite its prime location and a two-year restoration effort, the store's sales were not enough to cover the steep rental expenses.
How much did Zara pay in rent for the Mumbai store?
Zara signed a 21-year lease for the Mumbai store in April 2016, agreeing to a monthly rent of ₹2.25 crore with a ₹13.5 crore deposit.
What is the impact of high real estate prices on businesses in India?
High real estate prices in India make businesses uncompetitive, affecting factory, office, shop, and residential properties. This increases operational costs and reduces profit margins, making it difficult for businesses to sustain operations in prime locations.
How many Zara stores are currently operational in India?
Zara currently operates 23 stores across 12 cities in India, as of the latest data from the FY24 annual report of Trent, a Tata-owned company.
What other fashion brand is part of the Inditex-Tata joint venture?
The Inditex-Tata joint venture also includes the fashion brand Massimo Dutti.
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