I still feel that the development barrier would still exist even in modular blockchains. For example, if a new business adopts a modular blockchain, there would still be the need to develop smart contracts that would suit the business needs.

No, it will lower the development cost. Further, the ready-made modules can easily be handled by the less experienced developers. Optimization is possible.

If you go with Etherum, then you need to compromise your needs to some extent to adapt to the feature of the Etherum chain. That is not the case in modularization. In modular Blockchain, the development of things gets even easier than Etherum.

You can visit NULS Modular Blockchain, they have progressed a lot in this domain.

The idea of interoperable blockchains is something that we need badly. I'm not sure how a modular blockchain would be able to achieve it. Can you please let me know how this would work?

There will be protocol conversion, implemented at the base layer to be able to interact with heterogenous Blockchain. In comment I won't be able to write all, I would suggest you visiting the cross-chain mechanism of NULS, that is really wonderful. In fact, in modular Blockchain you can make it possible.

Thank you.