COVID-19 impact: Restaurant body asks landlords for rent waivers

Updated: Mar 30, 2020, 07:11 IST | Phorum Dalal | Mumbai

As National Restaurant Association of India seeks moratorium on rent, landlords explain their predicament with banks; will there be a solution soon?

A restaurant in Dadar was only giving takeaways on Sunday. Pic/Ashish Raje
A restaurant in Dadar was only giving takeaways on Sunday. Pic/Ashish Raje

After writing to the Centre for a deferment of various payments, the National Restaurant Association of India (NRAI) has written an open letter to landlords asking for a waiver on rent and CAM (Common Area Maintenance) from March to at least June. Landlords, however, have asked how they can do that when they too have business to run.

NRAI has also asked for a waiver of minimum guaranteed rents for six months post resumption and a 50 per cent reduction of CAM for the same period. It has also proposed a revenue-sharing deal not exceeding 10 per cent for six months after operations resume. The letter from Anurag Katriar, President, NRAI and CEO of deGustibus Hospitality, reads, "This appeal is aimed at ensuring our mere survival during such extraordinarily troubled times; we aren't trying to profiteer at the expense of the landlords."

 Sai Sagar restaurant in Bandra West wears a deserted look. Pic/Bipin Kokate
Sai Sagar restaurant in Bandra West wears a deserted look. Pic/Bipin Kokate

Restaurant landlords work in two ways — the first category earns rent from multiple properties and has no loan overhead. The second category works on Lease Rent Discounting (LRD) wherein, for instance, a landlord with a property worth R10 crore charges a rent of R5 lakh. This R5 lakh is paid to a bank as EMI for a new loan to buy another property and build a portfolio.

Fight this together
Nikhil Govani, director of Utopia Group that owns Victoria Mill which houses ShangHigh, Flea Bazaar Café and Lord of the Drinks among others, confirmed that currently, they are not charging rent. "We are facing a pandemic and have to fight this together. It is a matter of humanity that we are not charging our tenants," he said.

A default on EMIs converts the loan into an NPA (non-performing asset) and banks could eventually seize the property. The RBI recently deferred interest on loans for three months.

An important detail here is that banks won't allow property-owners with an LRD to enter a revenue-sharing model with restaurants as loans are issued on a particular valuation. A revenue-sharing deal would reduce the rent which is supposed to be paid as EMI. This would reduce the loan amount too.

We have businesses to run
A landlord with a varied restaurant portfolio in the city, on condition of anonymity, said, "We save money from our existing business, cut corners in our expenses, save money to buy properties to earn a monthly income after paying EMIs."

Once the property becomes loan-free after 12 years, it begins to generate income. On average, a good restaurant earns double its rent per month. "Like restaurants, landlords or property owners also have overhead costs. CAM includes salaries of minimum-wage workers like watchmen, liftmen, house-keeping staff. If they want a 50 per cent cut, are they saying we cut salaries by half too?" he asked.

While there have been deferments on payments, the liabilities remain. "If my EMIs bounce, there will be litigation. Will the restaurateur be able to use the premises? Whatever the government offers the restaurants, it will have to extend to landlords. If they allow a deferment on EMI, we will extend the same to our tenants. If restaurants want any deferment, then once the lockdown is over, they should gradually pay the balance along with the rent," a source said on condition of anonymity.

Another landlord said, "I lease commercial properties. My clients haven't paid rent since March saying business was bad and they are now shut. I have an LRD and a LAP (Loan Against Property). I managed to pay EMIs in March. But what happens in April? We will write to banks for a moratorium. Landlords and restaurant-owners will have to work it out together. They need us and we need them."

Catch up on all the latest Crime, National, International and Hatke news here. Also download the new mid-day Android and iOS apps to get latest updates

Sign up for all the latest news, top galleries and trending videos from Mid-day.com

Subscribe
This website uses cookie or similar technologies, to enhance your browsing experience and provide personalised recommendations. By continuing to use our website, you agree to our Privacy Policy and Cookie Policy. OK