Resolution Plans for Shopping Malls under the IBC – Challenges and Opportunities

Posted On - 11 September, 2025 • By - Sukrit Kapoor

Introduction

Shopping malls in India are more than retail hubs, they are integrated commercial, entertainment, and community spaces. With the rise of e-commerce, pandemic disruptions, changing consumer behavior, and liquidity stress, several mall developers have slipped into distress. Unlike residential projects where homebuyers dominate, mall resolutions focus on preserving cash flows, protecting tenant interests, and unlocking real estate value.

The Insolvency and Bankruptcy Code, 2016 (IBC) has become a key framework for reviving such distressed retail assets. Resolution plans for malls must address not only creditor recoveries but also continuity of operations, ensuring that anchor tenants, retailers, multiplex operators, and facilities managers remain engaged.

Why Malls Face Insolvency

Several factors have pushed mall developers into the insolvency net:

  • High leverage: Construction loans, lease rental discounting (LRD), and NBFC exposures.
  • Pandemic impact: Lockdowns in 2020–21 slashed footfall, with revenues yet to fully stabilise in smaller cities.
  • E-commerce disruption: A steady shift to online retail continues to affect tenant sales.
  • Vacancy pressures: Failure to attract or retain anchor tenants leads to cascading revenue losses.
  • Operational costs: Security, air conditioning, parking, and property maintenance are capital-intensive.
  • By 2025, several malls in Delhi-NCR, Mumbai, Pune, and Bengaluru have entered CIRP, with investors viewing them as prime brownfield opportunities.

Stakeholders in Mall Resolution Plans

  • Secured creditors: Banks and NBFCs financing land acquisition and construction.
  • Retail tenants: From anchor brands (multiplexes, hypermarkets) to small retailers.
  • Multiplex operators & F&B brands: Key for footfall and revenue.
  • Facility managers: Running operations smoothly during CIRP.
  • Consumers: Though not creditors, consumer perception impacts asset valuation.

Mandatory Contents Tailored for Malls

While the Section 30(2) IBC requirements apply universally, mall-specific resolution plans typically include:

  • Continuation of lease agreements with tenants, including renewal and renegotiation of revenue-sharing models.
  • Commitment of working capital to maintain operations (utilities, staff, maintenance).
  • Repositioning strategy: converting underperforming malls into mixed-use assets (office, co-working, entertainment).
  • Ring-fenced rental streams: ensuring tenant rentals are directed into escrow for debt servicing.
  • Operational continuity clauses: keeping the mall “open and running” to protect brand value during CIRP.

Judicial and Regulatory Perspectives

Courts have generally supported continuity of lease contracts in mall CIRPs. NCLT has emphasised that resolution applicants cannot arbitrarily terminate valid lease agreements with retailers or multiplex operators, as they form the lifeblood of mall revenues.

In cases involving malls in Mumbai and Gurugram, resolution professionals were directed to maintain critical utilities and facilities, ensuring tenants could continue operations even while insolvency proceedings were pending. The Delhi High Court (2023–24 rulings) clarified that malls under CIRP must still comply with municipal and fire safety norms, ensuring public safety.

Distribution of Proceeds

Unlike residential real estate, where homebuyers often seek possession, malls generate ongoing revenue. Thus, resolution plans usually involve:

  • Debt restructuring: Extending repayment schedules, reducing interest, or converting debt into equity.
  • Haircuts to lenders: Based on projected rental income and valuation of underlying land.
  • Protection of tenant rights: Continuity of rental agreements ensures footfalls and valuation.
  • Monetisation of unsold space: Sale of unleased retail space or conversion to offices.

Investor Interest – REITs and Private Credit

  • REITs (Real Estate Investment Trusts): Malls with steady rental streams are prime candidates for REIT portfolios. For instance, in 2024, a Gurugram mall under CIRP was acquired by a Brookfield-led REIT platform.
  • Private credit funds: Oaktree, Apollo, and Blackstone-backed credit arms have bid for distressed malls, often restructuring debt while retaining tenants.
  • Domestic developers: Large real estate groups acquire distressed malls to expand retail footprints.
  • This institutional interest highlights malls as cash-flow generating distressed assets rather than deadweight liabilities.

Challenges in Mall Resolutions

Despite opportunities, mall resolution plans face hurdles:

1. Tenant churn – Retailers may exit during CIRP due to uncertainty.

2. Anchor dependency – A single multiplex or hypermarket exit can collapse revenues.

3. Consumer perception – News of insolvency reduces footfalls, impacting leasing.

4. Regulatory overlaps – Approvals from fire, municipal, and environment departments delay handovers.

5. Valuation disputes – Between lenders (seeking higher recovery) and investors (seeking steep discounts).

  • Mixed-use repositioning: Several plans now propose converting parts of malls into co-working hubs, service apartments, or healthcare centres.
  • Digital engagement: Resolution applicants include commitments to modernise mall IT systems — parking apps, loyalty platforms, tenant analytics.
  • Green building compliance: Investors increasingly demand ESG certification to attract international capital.
  • Hybrid plans: Some malls are resolved, while adjacent retail/office assets of the same corporate debtor are liquidated.
  • Government facilitation: State urban bodies in Maharashtra and Karnataka have shown willingness to fast-track approvals for malls under CIRP.

What Must a Resolution Applicant Do for a Single-Mall Company?

When the corporate debtor owns and operates only one mall, the resolution applicant’s strategy must be both surgical and robust. Unlike diversified developers, where multiple projects provide fallback options, a single-mall company lives or dies by the performance of one asset.

(a) Deep-Dive Due Diligence:

  • Ownership and title clarity: Confirm freehold/leasehold status; resolve title disputes.
  • Encumbrances and charges: Mortgages, pledges, securitisation, or attachments by enforcement agencies.
  • Debt structure: Map bank, NBFC, and private lender exposures; review LRD facilities.
  • Tenant audit: Analyse anchor contracts (multiplexes, hypermarkets); assess termination and renewal rights.
  • Regulatory compliance: Check fire safety, occupancy, environmental clearances, and municipal dues.
  • Operational health: Assess utilities, security, HVAC, and footfall.
  • Pending litigation: Note disputes with tenants, tax bodies, and vendors.

(b) Structuring the Resolution Plan

  • Operational continuity: Immediate infusion of funds for utilities, staff, and property management.
  • Tenant protection: Preserve leases; incentivise anchors with temporary rebates or joint marketing.
  • Debt restructuring: Link repayments to rentals; set up escrow-monitored inflows.
  • Capex infusion: Allocate funds for renovations, tenant remix, and repositioning.
  • Implementation roadmap: A 3–5 year plan with quarterly milestones.

(c) Stakeholder Engagement

  • CoC: Present conservative but realistic projections.
  • Tenants: Secure commitments from anchors and multiplexes; build confidence.
  • Regulators: Negotiate waiver or rescheduling of property tax arrears.
  • Facility managers: Retain professionals to ensure operational stability.

(d) Value Enhancement

  • Diversify tenants: Introduce experiential retail, gyms, clinics, or family entertainment.
  • Digitisation: Tenant apps, loyalty programs, parking and billing automation.
  • ESG upgrades: Solar panels, energy-efficient HVAC, and green certifications.
  • Brand repositioning: Rebrand or convert into a mixed-use destination.

(e) Risk Mitigation

  • Secure financing upfront: Provide binding commitments.
  • Performance guarantees: Escrows or bank guarantees to reassure creditors.
  • Buffer for disputes: Build contingencies for tenant exits or regulatory delays.
  • Exit strategy for lenders: Plan REIT monetisation or equity conversion.

(f) Judicial Reliefs

  • Seek waiver of municipal dues and penalties.
  • Request NCLT approval for lease restructuring.
  • Secure exemptions under Companies Act for related-party arrangements.
  • Relief from stamp duty on transfer or renewal of tenancy rights.

Best Practices for Resolution Applicants in Mall Cases

Resolution applicants in mall-focused CIRPs should adopt a holistic, stakeholder-sensitive, and forward-looking approach.

(a) Anchor Tenant Strategy

  • Secure commitments from anchor tenants before plan submission.
  • Offer flexible lease terms tied to actual sales recovery.
  • Support with visibility campaigns and mall-level marketing.

(b) Working Capital Commitments

  • Ring-fence 18–24 months of operational costs in escrow.
  • Cover security, utilities, insurance, and maintenance.

(c) Tenant Engagement

  • Form a tenant advisory committee for regular communication.
  • Offer redressal mechanisms for smaller retailers.
  • Collaborate with multiplex and F&B operators for promotional events.

(d) Debt Structuring

  • Propose debt-equity swaps where creditors can share upside.
  • Base repayment schedules on conservative rental cash flows.
  • Provide periodic monitoring reports via independent evaluators.

(e) Marketing & Repositioning

  • Present a detailed repositioning plan (retail + leisure + offices).
  • Introduce events and experiences to increase footfall.
  • If needed, rebrand the mall to refresh consumer perception.

(f) Legal & Regulatory Reliefs

  • Proactively secure NCLT approvals for lease restructuring.
  • Obtain waiver of past municipal dues and property tax penalties.
  • Ensure full compliance with fire and safety regulations.

(g) ESG and Digital Focus

  • Commit to green certifications to attract global funds.
  • Digitise tenant management systems.
  • Link rentals to actual sales through data-driven analytics.

(h) Governance & Monitoring

  • Set up a Monitoring Committee with creditor and tenant representation.
  • Provide quarterly disclosures on occupancy, rentals, and footfall.
  • Certify progress through independent engineers and auditors.

Conclusion

Resolution plans for malls under the IBC represent a unique blend of legal, commercial, and operational considerations. Unlike housing projects, where the focus is on possession, malls must remain open, vibrant, and income-generating to retain value.

For creditors, malls are attractive because of recurring lease rentals and potential for repositioning. For resolution applicants, malls offer strategic entry into India’s growing retail sector at discounted valuations. For tenants and consumers, continuity of operations is paramount.

The future of mall resolutions lies in:

  • Institutional investor participation (REITs, private equity).
  • Asset-specific strategies for single-mall companies.
  • Project-level hybrid resolutions.
  • Emphasis on repositioning and ESG compliance.

With urban India demanding experiential retail, well-crafted resolution plans can turn distressed malls into thriving commercial destinations once again.

Contributed by – Nivedita Bhardwaj