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HDFC, Axis, Kotak Mahindra Bank look to renegotiate rents

MUMBAI: India’s top seven private lenders including HDFC Bank,Kotak Mahindra Bank,Axis Bank and ICICI Bank, are renegotiating contracts to lower their annual rental bill estimated at almost Rs 4,000 crore.

In most cases, the banks are asking their landlords for a deferral on rent payments or seeking a better deal due to the impact on business in light of the Covid-19 lockdown.

“We are negotiating rent on leases that are coming up for expiry in this financial year – this could help save us at least 10-20% on our annual rent outgo,” said a private sector bank official on condition of anonymity.

Notices sent to landlords, reviewed by ET, showed that HDFC Bank and Kotak Mahindra Bank have sought rent-free periods or extension of rent commencement dates from landlords for branches that could not be opened due to the lockdown. Some banks have sought legal opinion on ways to reduce rent and invoke the force majeure clause. Kotak Mahindra Bank has not taken legal opinion on rent reduction.

“The bank has not consulted any property expert or taken any legal opinion on rent reduction till date. Cost optimisation is an ongoing activity for the bank and the bank will continue to explore all opportunities responding to the changing situation,” Rohit Rao, chief communication officer, Kotak Mahindra Group, said in response to ETs email.

HDFC Bank, Axis Bank, ICICI Bank did not respond to ETs emails.

As per bank annual reports and data compiled by real estate data intelligence firm Propstack, HDFC Bank has an expected rent outgo of Rs 1,054 crore for the next 12 months. This figure stood at Rs 805 crore for Axis Bank, Rs 673 crore for ICICI Bank and Rs 554 crore for Kotak Mahindra Bank.

These four lenders along with IndusInd Bank, RBL Bank and IDFC First Bank have operating lease rentals of Rs 4,000 crore in the next 12 months. These seven banks had paid Rs 3,626 crore as rent last year, data collated by Propstack showed.

With the nation on a 40-day lockdown scheduled to lift on May 4, several banks have asked their admin teams to create work from home structures to rationalise office space use in the near future. Banks anticipate a reduction of space needed at branches as social distancing becomes the norm after the coronavirus outbreak.

“We will be looking to optimise rental costs, though it still early days. We haven’t spoken to landlords,” an RBL Bank spokesperson said. “Our administration team is looking at how best to capitalise the work from home culture to reduce office space requirements.”

MUMBAI: India’s top seven private lenders including to some landlords, has sought waiver of rent till the situation normalises.

April 22, 2020

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