Home / Industry / Retail /  Third covid wave to shave off 10% of rental revenues for malls: Crisil
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NEW DELHI : Malls could see their rental revenues drop by 10% this fiscal—ratings agency Crisil said in a note released on the sector on Wednesday. Recovery, it said, will be “relatively faster" compared to earlier waves as covid-19 cases recede in the coming weeks.

India is currently witnessing the third wave of covid-19 infections—with the country reporting a rapid rise in daily cases. As a result, several states have placed restrictions such as curbs on store operating hours.

In the national capital, non-essential shops are directed to open on an odd-even basis.

“Renewed restrictions and localised lockdowns to contain the Omicron variant-led third wave of the covid-19 pandemic will pare as much 10% off the rental revenue of mall owners this fiscal, compared with earlier expectations," Crisil Ratings said in its report.

The ongoing restrictions could also stall the overall recovery reported by malls in the current fiscal. Crisil analysed India’s top 14 malls for its report.

“The third wave may restrict recovery of mall revenue in fiscal 2022 to 70-75% of the pre-pandemic level as against earlier expectations of 80-85%," said Anand Kulkarni, director, Crisil Ratings.

The pace of recovery, though, will vary across segments.

Categories such as grocery, apparel, footwear, cosmetics, electronics, and luxury—which account for 75-80% of mall revenues—will recover quickly when the third wave wanes, Crisil said in its research note. It flagged slower recovery for cinema halls and family entertainment centres.

In what could lead to swifter recovery for malls—Crisil noted that restrictions for the ongoing wave within the top eight cities are expected to last only 4-5 weeks compared to 7-8 weeks of closure seen during the second wave.

"Unlike the earlier waves when malls were shut completely, metros such as Mumbai and the National Capital Region have only implemented capacity or timing restrictions so far in the current wave. This difference in response of state governments, supported by lower hospitalisation rates, augurs well for the malls business this time around, though the capacity and timing restrictions are expected to dampen footfalls and retail sales," it added.

As a result, even though the third wave may delay full recovery, the bounce-back is expected to be swifter and sharper, Kulkarni said.

Retail sales in malls had reached 90% of the pre-pandemic levels in the third quarter of this fiscal. This was led by rapid easing of restrictions post the second wave, pent-up demand, and an increasing vaccination coverage.

Meanwhile, it noted that rental waivers are likely to be lower than the past two waves, given the faster pace of recovery post the third wave.

“The pace of recovery will be mixed across geographies as well, depending on the intensity of the pandemic and the extent of restrictions imposed by local authorities," it said.

Retailers of food and beverages, cinema and family entertainment centres, are likely to be “hit harder" by the drop in footfalls. Such tenants could seek see a combination of rental waivers or continuation of a pure revenue-share model for longer than anticipated earlier.

“Recovery for cinema, in particular, is likely to be pushed back by 3-5 months due to postponement of some big-ticket releases," it added.

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