NEW DELHI: Malls were supposed to be the symbols of prosperity in India's 'boomtowns'. Instead they have turned out to be edifices of gloom. Notwithstanding their bright facade, these half-empty buildings in smaller towns reveal the other side of the India story, as vacancy levels rise and consumption remains low.

"The bubble has burst," says economistBibek Debroy. "There has been excess capacity in smaller towns and not so much demand. These boomtowns haven't seen a huge consumption story yet and salary levels too haven't increased the way they were expected to," he says.

Vacancy levels in malls across the country are growing at an alarming rate, says property consultancy Jones Lang LaSalle. In smaller towns, over a third of the space is unoccupied, as against just 7% in 2007. Supply of retail space has increased dramatically, but demand from retailers and overall consumption have dropped.

"Many developers overestimated the appetite for retail in these small towns. They did not realise that the consumption threshold here was low," says Ashutosh Limaye, head of research at Jones Lang LaSalle.

The slowdown in the economy and lack of disposable income in the hands of the youth of these smaller urban centres have taken their toll. Take the case of Amravati in Maharashtra's Vidarbha area, where every evening the town's youngsters gather around a couple of glitzy malls. But, says Saurabh Keshwani, the owner of Amrawati's J&D Mall: "They just do not spend ...like the folks in big cities." Nearly 40% of the space in his mall lies vacant and he is considering leasing space to offices and banks. "It isn't easy closing leasing deals with retailers these days. The retail boom did not happen the way we expected," he adds.

Some 350 km away, in Aurangabad, the story is no different. The Prozone CSC mall has been in operation for over two years but a fourth of it still lies unoccupied, even thoughJaguar Land Rover recently opened a showroom there. "International brands are still being cautious about coming to tier II and III cities," says Monil Gheewala, general manager, business development, at Prozone Enterprises.

According to Rajesh Shukla, founder director of NCAER Centre for Macro Consumer Research, the youth account for 60% of mall consumption.

But youngsters residing in small towns lack the purchasing power of their big-city counterparts. "It's mostly the elders in a family who are the decision makers and they have a propensity to buy unbranded items found in the local markets,'' Shukla says.

Many of these malls in small towns were constructed by builders, who got carried away by the good times of the mid-2000s, but were caught napping when the slowdown hit them in 2008.

When Indore-based Century 21 Mall developed a 500,000 sq ft structure in Bhopal, it was hoping it would be the talk of the town. Now, 40% of the building has no takers.

Ditto for Delhi-based builder Supertech, whose malls in Meerut, Haridwar and Rudrapur have poor occupancy levels. "We are keeping our fingers crossed," says RK Arora, managing director of Supertech.