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Commercial Rental Prices Could Be Down by 20-30 per cent as Small Businesses Struggle to Pay Their Dues


Commercial Rental Prices Could Be Down by 20-30 per cent as Small Businesses Struggle to Pay Their Dues
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As the lockdown continues in some form with a handful of restrictions, cracks are beginning to appear in the commercial real estate sector in a big way. Small businesses and other establishments that rely on rented properties are struggling to pay their rents and many are said to be defaulting. Keeping this in mind, property experts believe that the average lease rentals at BKC (Bandra Kurla Complex) may go lower than the current rate of Rs 250 and Rs 300/sq ft per month.

Experts in the sector further believe that rents may be cut by 20 to 30 per cent in the midst of the faltering economy. It is believed that this could surge to 32 per cent if the lockdown goes on for another four months. It is said that there would be 225 million sq ft of vacant office space under this scenario.

Read Also - Investors Distress-Selling Super-Luxury Real Estate In Mumbai Amidst The Lockdown

It’s no secret that several small businesses are struggling to keep up with the lockdown, and in some cases, companies are unable to pay salaries to their employees. With this in mind, monthly rental expenses appear to be more of a burden right now.

Landlords at BKC have similar concerns as many fear their tenants will move their establishments to a cheaper location. One landlord said - “Property taxes and outgoings are the highest in BKC. Many may want to wind up and move to cheaper locations.”

There also incidents being reported where clients have terminated their lease agreements just months after signing it even though they have already spent lakhs on interior upgrades. 

While the effects aren’t quite as evident on giant corporations or companies, it’s clear that startups and other small establishments are facing a severe crisis in terms of paying their monthly dues as well as employee salary. As a consequence, this may also create a job crisis in some of the key sectors of the economy, particularly IT. 

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