Office and retail developer Vornado Realty Trust struck a joint venture with Indian conglomerate Reliance Industries Ltd. to spend $500 million building and operating shopping centers in India, signaling the latest effort by a U.S. retail developer to expand abroad.

Vornado, of the U.S., and Reliance will spend $250 million each to buy and build shopping centers spanning 500,000 to one million square feet in Indian cities. Many of the centers will be anchored by a hypermarket -- a massive store selling both groceries and general merchandise -- operated by Reliance.

The Vornado-Reliance partnership follows several other forays by U.S. mall builders into other countries, especially since a lull in consumer spending and retailer expansion has sapped retail development in the U.S. Kimco Realty Corp., a large U.S. developer of open-air shopping centers, has assigned 40% of its construction budget to building centers in Mexico. Luxury-mall operator Taubman Centers Inc. is building malls in Macau and South Korea. Developers Diversified Realty Corp. plans to build three malls per year in Russia and Ukraine over the next seven years. And Simon Property Group Inc., the largest U.S.-based mall operator by number of properties, is "assessing the market" in India.

India, with its burgeoning middle and upper classes, represents a tantalizing foreign market for U.S. retailers and mall builders. With a population of 1.1 billion, India generates retail sales of $350 billion annually -- a figure that industry analysts predict will double within seven years. Individual mom-and-pop stores account for more than 90% of sales, due partly to government law barring foreign retailers selling multiple brands from operating stores in India.

Even so, foreign builders and retailers -- led by Wal-Mart Stores Inc., Britain's Tesco PLC and France's Carrefour SA -- have positioned themselves for an eventual easing of India's restrictions on foreign-operated stores. Wal-Mart has struck a joint venture to handle back-end operations such as logistics and information technology for stores run by Indian conglomerate Bharti Enterprises Ltd. Foreign retailers that sell a single brand, such as Nike Inc., can operate in India but can own no more than 51% of their operations there.

To be sure, India's retail market, while loaded with potential, is still nascent. Real-estate broker Cushman & Wakefield projects that nearly 17 million square feet of malls will be built this year in eight major cities in India. By comparison, 45.5 million square feet of retail space is projected to be built in the eight largest U.S. cities this year, according to Property & Portfolio Research Inc.

Vornado, which owns more than 100 million square feet of office, retail and merchandise-mart properties, declined to comment on the Reliance joint venture beyond a release issued Wednesday. Reliance, India's largest private company with annual revenue of more than $34 billion, operates more than 700 stores in addition to its massive operations in oil, gas, petrochemicals and textiles, among other businesses.

Write to Kris Hudson at kris.hudson@wsj.com and Eric Bellman at eric.bellman@wsj.com

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