LRD is a term loan offered against rental receipts derived from lease contracts with corporate tenants.
The move, however, has been opposed by the Shopping Centers Association of India (SCAI), which represents more than 650 modern malls
and shopping centres. The association estimates that the move will impact about 50 per cent of such centres and may force them to default on payments, leading to NPAs of over Rs 25,000 crore.
The association has also brought to the notice of the Reserve Bank of India (RBI) that the three-month loan moratorium announced by it is not being offered to many mall owners.
One bank in its letter to a shopping mall company has stated that according to the terms of loan sanction, the lease rentals are hypothecated to them and that the tenants of the mall have also submitted their consent letters. Business Standard has reviewed the letter.
have an exposure of about Rs 1 trillion to shopping malls
and centres, of which 75 per cent of the repayment is done through LRD or the rental income.
The SCAI says retailers in shopping malls
have mostly been unable to pay rentals due to the lockdown
and some have even sent “force majeure” notices to landlords.
Amitabh Taneja, chairman of the association, says: “Many mall owners have received letters from their banks
invoking LRD obligations. They have not extended the three-month moratorium on loans, as announced by the Reserve Bank of India, which we have bought to the notice of the RBI. The industry will see huge NPAs if we don’t get moratorium on our loans for anything between 9-12 months and loss of jobs in millions.”
Mall owners earn 85 per cent of their revenues from rentals and therefore have very little leeway to pay the differential in the amount of money that banks get from LRD.