Pursuant to declaration of COVID-19 as a ‘Pandemic’ by the World Health Organisation (WHO), Government of India (GOI) has invoked the provisions of section 2 of the Epidemic Disease Act, 1897 in order to curb the spread of COVID-19. Further, as a precautionary measure, as required to arrest the spread, various State Governments have ordered three weeks of lock down starting from 25th March, 2020.
Due to this lock down nearly 700 to a 1000 malls across India have been asked to shut down until further notice, as there is no exact time frame to control the Pandemic; hence the lock down can be extended beyond three weeks. In this time of uncertainty, malls are bleeding; however, few to developers are coming forward to relief the retailers. Let’s see how mall industry is sailing through the tough time.
Malls are hit hard due to Covid 19
The impact of the shut-down of the Shopping Centres across various cities has been beyond comprehension,” says Abhishek Bansal, Executive Director, Pacific Malls. “Monetary losses would of course be huge. Sales are already down anywhere between 25 to 50 per cent for retailers. Fashion is seasonal so spring merchandise will suffer badly. Cinema, entertainment and restaurant businesses are already bleeding. Rumours, lack of clarity and awareness and fear of uncertainties add to the shoppers' confusion”, he adds.
“The cash flow is the biggest challenge for the malls as the only source of income of these centres”, says Bansal. “The rental income has come down to zero since the closure of malls. With expenses remaining constant their debt serving and interest payment obligations remain. Unlike all other businesses, they do not have any goods or merchandise to sell or reduce inventory holding or other such measures, which other industries can take. Their Collections have completely dried up during this period, while they continue to bear a high fixed cost towards Personnel, Utilities and ongoing routine expenses”, he adds.
Developers coming forward
In this situation of uncertainty many developers are coming forward to bail out the retailer in this tough time. For example, Lulu Group announces rental waiver 12 crores for Lulu Mall’s retailers.
Amid the economic crisis faced by businesses across due to Covid 19 global pandemic, Lulu Group Chairman and Managing Director M. A. Yusuf Ali leads the way by offering retail relief for all its retail parters in Kerela. One month’s rent from 254 stores in Lulu Mall, Kochi, amounting to 11 crores will get waived off owing to decision taken by M. A Yusuf Ali. The retailers of Y Mall, Triprayar, located in his hometown- Nattika will also benefit from the announcement. The monthly rental revenue both the malls combined, will get rent relief of 12 crores.
Due to rapid spread of Coronavirus, and the subsequent slump in consumption, businesses across the state are suffering.
Shibu Philips, Business Head, Lulu Mall shared above mentioned information on his linkedin profile. While sharing the information he also said, We are going through one of the toughest periods globally. Covid 19 has changed our lives in ways we never imagined. The effect on all our businesses profound too
Resonating the thoughts on covid 19 Shibu has informed in an earlier press note“It is relevant to note that even after the SC/ Mall open up in the due course of time – there will be many challenges in the Near term which will include: Low footfalls and hence low Sales at the Malls; Revenue and collections will take time to streamline; GST and other statutory payments will get impacted as well”.
“Also, upcoming malls under construction will suffer delays due to slow/shut down in countries like US, UK ,Italy and China. Manpower at sites have also drastically fallen due to this outbreak. All this will cause a delay in opening the new malls. So, the need of the hour is a moratorium in delaying the repayment of loans and extending the period for taking the benefit of loans granted for the projects”, adds Philips.
Developers Seeking Intervention from Indian Government
Following are the recommendations made by Shopping Centre Bodies
· Provide short-term financing option for a period of 6 to 12 months, at lower interest rates to meet the increased working capital requirements.
· Grant GST rebates to offset the losses on account of and for the period of closure of business and/or in the alternative permit flexibility in deposit of Goods and Services Tax (GST) since GST needs to be deposited immediately upon raising of invoice, however, corresponding payments are likely to be delayed, resulting in an additional cash flow burden on shopping centres.
· Provide relief so that credit rating of shopping centres is not adversely affected due to delays in repayment of bank loans, interest, EMI, etc.
· Issue appropriate directions to the Insurance Regulatory and Development Authority (IRDA) to include insurance against loss of profits on account of epidemic – which is not currently included in the policies.
· Any other relief which may be deemed fit in the present scenario.