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Malls in India seek government aid during shutdown

By Wei ZhangIndia
1 min read
Central Premium Mall vietnam
Central Premium Mall vietnam
In this article (5)

Malls in India affected by the coronavirus outbreak are seeking a bailout from the government to compensate for losses incurred during a mandatory shut down period through to March 31.

The decision has affected both retailers and developers in the various states that have implemented the ban on trading during the affected period in a bid to slow the spread of the virus.

“A shut down like this effectively means that there are all kinds of expenses to be borne by everybody; malls may not get rent and would not be able to service loans they have taken for creation of the mall, capital expenditure, etc,” said Retailers Association of India CEO Kumar Rajagopalan in a report. “It’s all going to be a big loss. The government needs to look into this and support these entities to save lakhs of jobs”.

A representative body for malls in India is seeking a lending window, a moratorium on loan repayments or to allow banks to reschedule debt, as well as a potential waiver of property tax and electricity charges.

Industry experts have expressed skepticism that footfalls will return to normal within the next few months no matter how brief the shutdown period may be, which is likely to impact rental negotiations for retailers, as well as the deferment of new mall openings.

Observers of the situation have commented that any five-day halt to business will erase the month’s profits for retailers.

“Mall operators stand to lose 20 to 25 percent of their annual revenue assuming that a rent-free period is given to retailers,” read an ICICI Securities report. “In our view, the most likely scenario is that mall operators and retailers may share the losses given that malls have now become a relationship-based business with the same retailer having presence across malls.”

Questions & Answers

Q.

What specific forms of government assistance are malls in India requesting?

A.

Malls are seeking a lending window, a moratorium on loan repayments, or for banks to reschedule debt. They are also asking for a potential waiver of property tax and electricity charges from the government.

Q.

Why is the current shutdown particularly difficult for mall operators in India?

A.

Mall operators face significant expenses but may not receive rent, hindering their ability to service loans taken for mall creation or capital expenditure. This creates a large potential financial loss for them.

Q.

How are mall operators and retailers expected to manage the financial losses from the shutdown?

A.

It is considered most likely that mall operators and retailers will share the losses. This is due to their established, relationship-based business with retailers often having a presence across various malls.

Q.

What is the expected impact on mall operators' annual revenue if retailers are granted a rent-free period?

A.

An ICICI Securities report suggests that mall operators could lose between 20 to 25 percent of their annual revenue if a rent-free period is provided to retailers.

Reader pulse

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