Shopping mall developers and retailers are back at the negotiating table after businesses failed to pick up despite relaxations in the government's guidelines. While mall owners have given up to full waivers to retailers on monthly rentals during the lockdown period from March to May, retailers say it will not suffice.
Some mall owners had agreed to short-term deferrals of rent, worked out a revenue-share pact, and even offered sharp discounts on existing rentals for the lockdown months. Some are now willing to give a 20-30 percent waiver on rentals, Business Standard has reported.
Retailers have argued that rental waivers should be extended for a few more months because business is not expected to pick up before the festive period - October-November.
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"Localised lockdowns and weekend curfews continue to remain in place in many cities despite relaxations. Business hours have also been curtailed,” said Anand Agarwal, Chief Financial Officer, V-Mart Retail.
"These curbs have impacted businesses and retailers in both malls and high-street properties are re-negotiating their rental terms,” Agarwal said.
Managing director of Vijay Sales, Nilesh Gupta, too believes that Diwali would be a better occasion for retailers to look forward to in terms of business.
A senior executive with a Mumbai-based mall firm said the firm would have to go for the second round of negotiations with retailers. Mukesh Kumar, CEO at Infiniti Mall, said, “We are getting requests for pure revenue-share arrangements from retailers. But our agreements do not permit this."
Another executive with Phoenix Mills said most of its retailers had agreed to a rent waiver of 30 percent, following the reopening of malls.
The increasing spread of the COVID-19 pandemic, starting from mid-March and the resultant preventive measures taken by the Centre and various state governments have severely affected retail mall operations.
Mall operators generate almost complete income from the lease rentals received by the tenants. The retailers have been severely impacted and revenues for most of them have been reduced to zero during the closure period.
Rental expenses form a sizeable share of the 12-16 percent of the revenues for retailers, therefore, in line with expectations, the tenants have been negotiating with the mall operators for a waiver or rebate on the rentals.
Over the last few weeks, malls in some cities have resumed operations but properties in some of the metros and tier-I cities are yet to resume due to the severity of the pandemic in the respective geographies.
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