Mall developers and retailers are at the negotiating table again as sluggish business forces the two to rework rent pacts. While mall owners gave full, and in some cases, half waivers to retailers on monthly rentals during the lockdown months of March, April and May, retailers say this may not be enough.
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, saying they remained sympathetic to retailers.
“Localised lockdowns and weekend curfews continue to persist in many cities despite the Unlock programme. Business hours also remain curtailed,” says Anand Agarwal, chief financial officer, V-Mart Retail, which is into fashion and lifestyle retailing. “This has an impact on business. Retailers in both malls and high-street properties are renegotiating their rental terms in view of the current environment,” he says.
A recent study by the Retailers Association of India (RAI), an apex body of organised retailers, says that while food, grocery and consumer durables’ retailing have shown signs of recovery in July, apparel, lifestyle, beauty and wellness retailing have not revived yet.
Malls in Mumbai and Maharashtra were allowed to open on August 5, two months after malls in other cities welcomed consumers into their properties. Mall owners appear willing to give a 20-30 per cent waiver on rentals now as opposed to full or half rental waivers that were given earlier. Discounts on fixed-rent or minimum guarantee payments are also lower as opposed to the peak lockdown months, persons in the know said.
Retailers say they want more, arguing that rental waivers should be extended for a few more months, since business is not expected to pick up before the Dussehra-Diwali period, which falls in October-November.
Nilesh Gupta, managing director of electronics chain Vijay Sales, says that Diwali would be a better occasion for retailers to look forward to in terms of business. “By then, I hope to see greater movement of people, partly because Diwali is an important festival and there will be fatigue due to months of lockdown. I expect consumers to loosen their purse strings too,” he said.
A senior executive with a Mumbai-based mall company, which has properties in North India, said the firm would have to go for a second round of negotiations with retailers. “We have reworked terms of the revenue-share pact with our retail partners, but many are saying that they are not generating enough sales to meet the revenue-share ratio. Some of them are also asking us to remove the minimum guarantee clause from contracts completely, which is not possible,” the executive said.
Mukesh Kumar, chief executive officer at Infiniti Mall, which has properties in Malad and Andheri in Mumbai, says, “We are getting requests for pure revenue-share arrangements from retailers. But our agreements do not permit this. We can give discounts on minimum guarantee payouts till October.”
An executive at Phoenix Mills said most of its retailers had agreed to a rent waiver of 30 per cent following reopening of malls. During the lockdown months of March to May, Phoenix Mills, which has properties in Mumbai and other cities, had reached an agreement for 50 per cent rental waivers with about 80 per cent of its retail partners. The agreement excluded multiplexes, which have not reopened yet.