Mall owners, retailers fail to agree over contentious issues amid lockdown

The lockdown, announced by the Modi government, is slated to end on April 14. But given the rising number of Covid-19 cases in the country, some individual states may extend the lockdown.
Mall developers and retailers are yet to find common ground on the contentious issue of rental waivers, with the differences coming at a time when the retail industry, barring grocery, has come to a halt because of the 21-day nationwide lockdown.

Developers, such as DLF and Phoenix Mills, say the force majeure clause, which retailers have indicated they would apply, in case there was a complete breakdown in talks, does not apply to the lockdown period. "We will have to work with retailers (on the issue of rentals). We can take a call only after visibility regarding mall openings emerge," says Shishir Shrivastava, managing director at Phoenix Mills, which operates malls in Mumbai, Pune, Bengaluru, and other cities.

The lockdown, announced by the Modi government, is slated to end on April 14. But given the rising number of Covid-19 cases in the country, some individual states may extend the lockdown.

Shrivastava says the force majeure clause makes no sense when a government directive has led to the temporary closure of malls, multiplexes, and retail establishments. Business, he says, will eventually make its way back, a point contested by retailers, who argue the market remains weak.

Lalit Agarwal, chairman and managing director, V-Mart Retail, who is also a member of the Retailers Association of India (RAI), said retailers were looking at an amicable solution to the problem. “I don't think the endeavour is to damage our relationship with mall owners. They are important partners. But most retailers are speaking with mall owners on an individual basis.

Outcomes will vary based on negotiation," he said.

In the absence of a clear plan of action on waiving rentals, developers said they were working on reducing charges on common area maintenance and passing it on to retailers. Developers that Business Standard spoke to said they were yet to raise invoices on rentals for their retail clients, implying the gravity of the situation is not lost on them altogether.

Pushpa Bector, executive director, DLF Shopping Malls, said: “Times like these require us to be patient and adapt our business strategies to prepare for the new normal.”

Kumar Rajagopalan, CEO, the RAI, said most heads of retail companies expect the crisis triggered by the pandemic and the subsequent lockdown to stretch well beyond the April-June quarter.

“It will take almost nine months to recover and retailers can tide over this period with help from the government, banks, and allied partners,” he said.

The RAI has asked for urgent relief measures from the government to help bankroll the sector, which employs almost 6 million people. These include an extension of the loan moratorium to retailers to 270 days, providing additional working capital to tide over the cash crunch, and making available easy credit lines to pay wages and salaries.

The fear is that if relief measures are not provided quickly, small and medium retailers, accounting for 30 per cent of the market, could exit in the next few months. "This is because small and medium retail brands do not have a force majeure clause with landlords on high streets," Susil S Dungarwal, founder at Beyond Squarefeet Advisory, said.

Privately, retailers said that mall developers should speak to lenders to give them a moratorium on their loans with banks instead of demanding that retailers pay up fixed costs.

For now, the tug of war continues.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel