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Retailers across product categories and restaurants continue to seek lower rentals as they look to curtail costs to ensure business activity reaches pre-covid levels over the next few months.

“Rent corrections will have to stay for a while as business continues to be slightly depressed. The rent market pre-covid was over inflated and some degree of rationalization has come into the market. We are nowhere near or are ever going to sign the kind of properties we were signing at pre-covid rents," said Riyaaz Amlani, managing director (MD) and chief executive officer (CEO), Impresario Handmade Restaurants, which runs more than 58 restaurants in the country across casual-dining, cafe-bar, and other formats.

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The company had to give up five outlets last year. “We intend to replace all of them this financial year, albeit at corrected rentals," he said.

India’s lockdown and subsequent restrictions placed because of concerns around covid have forced retailers to relook at their costs. Many went into rental negotiations with mall developers as temporary store closures and subsequent dip in footfalls and business left them in a lurch.

The pandemic has also prompted landlords to lower rentals as businesses crumbled under the pressure of the lockdown and left properties vacant. “We are seeing an overall 25% to 50% correction in high street rents and about 25% to 40% in malls," said another retailer on the condition of anonymity.

Now more than before ensuring that every outlet is profitable at a store level is going to be extremely critical, said others. “I’m not going to be lured by the fact that I have a very beautiful or large property available for 20% less than what it was last year. For existing stores profitability will be key," said Sanjay Vakharia, chief executive officer, Spykar. For the retailer rentals are 18% of its retail store costs.

Retailers said they will be shy of going back to pre-covid rentals till business fully recovers. Revenues generated over the next 12 months could dictate their ability to pay rentals, said others.

Retailers are also contemplating a revenue sharing model as opposed to flat rentals in high streets as uncertainty still looms large over the retail business, said Abhishek Sharma, director, retail, at Knight Frank, a realty consulting firm.

“They (retailers) are willing to occupy but at their own terms, not the terms of the landlord anymore. I think it will take about one-and-a-half years for retail to recuperate," said Sharma.

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