Cash flow is the biggest challenge for malls : Mall Owners

Following the Covid-19 outbreak, the overall industry is collectively facing challenging times with many state governments directing malls & other public spaces and facilities to shut down. From shoppers’ cautious approach to financial crunch, mall owners throw light on the various challenges thrown by the coronavirus pandemic and measures adopted to curb business losses.

Impact of Covid-19

Amitabh Taneja, Founder Chairman, Shopping Centres Association of India (SCAI) says that the Shoppers are obviously extremely cautious so is the shopping centre industry. “The fact that fears itself is contagious; it becomes a very tricky situation for all. The utmost priority is safety of people”. About measures undertaken by the industry, he says, "Today most of our malls are equipped to handle emergency situations and go through end number of audits and checks. Our members are personally making rounds of operational malls driving special sanitisation and cleanliness programs and ensure that we set benchmarks and assure all stakeholders of our commitment to fight the challenge in hand. We hope that the situation stabilizes and normalcy is restored at the soonest".

Monetary Loss  

“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. The cash flow is the biggest challenge for the malls as it’s the only source of income of these centres”, says Bansal.

He further adds, “The rental income has come down to zero since the closure of malls. 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”.

 Challenges Ahead

Shibu Philips, Business Head, Lulu Mall says, “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.

Measures Undertaken

The Shopping Centres of India (SCAI) on behalf of its members and also non member malls has sought appointments for personal meetings with concerned authorities to discuss following measures to help shopping centres sail through this challenging phase:

 ·      Allow a moratorium period during continuation of Pandemic, in repayment of bank loans, interest, EMI, etc. without levy of any penalties including penal interest. Further, one-time loan restructuring with lower rates of interest may be permitted for shopping centres.

 ·      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.

 “The implementation of these measures can immensely help the shopping centres and industries referred hereinabove. Once the country is free from the virus malls that have emerged as the most vibrant social spaces for Indians to celebrate their leisure time will play a critical role to bring back life and uplift sentiments of the masses. Hence, it is all the more important to ensure that necessary support is provided to the shopping centre industry to cope up with the challenge and be ready to welcome visitors once the restrictions are lifted”, shares Taneja.

Resonating the same thoughts, Yogeshwar Sharma, Executive Director & CEO, Select CityWalk says, “The whole world is reeling under the effects of pandemic, we have to jointly face this challenge posed by Covid-19. Over 5000 families are dependent on each shopping center.  Everyone has to absorb a bit of it and therefore, the government’s compassionate measures are going to be a major help in tiding over this Black Swan event.”