By Sharina Ahmad 

THE government should consider raising the minimum reduction of rental rates of 30% to at least 50% for the landlord of private premises to qualify for additional tax deductions.

Many have lamented that the recent move by the government allowing private premises owners who reduce their rental rates by at least 30% from April to June to qualify for an additional tax deduction may not be sufficient to tide the retailers over.

The rental reduction offered by landlords will lessen the tenants’ burden so they would be better able to manage their finances as the movement control order (MCO) has been extended to April 28.

Malaysia Retail Chain Association (MRCA) president Datuk Seri Garry Chua said retail businesses would need some time to go back to “business as usual”. 

For instance, retailers in China are making a slow and steady recovery after their business fell as much as 80% due to the pandemic.

“Therefore, in the next three months, (landlords should give) 50% rental reduction or based on the retailer’s gross turnover (GTO). Do not expect business to pick up as usual like in China as the retailers themselves are struggling to get back to work after the Covid-19 lockdown. 

“Retailers need two months’ free (rental) to survive as most of them do not have enough cash flow for even two months as surveyed by SME Corporation Malaysia,” Chua told FocusM.

He stated that to-date, only two malls — Mid Valley and EkoCheras — have given two months’ free rental for March and April. Others have given half to one-month free rental.

Chua also said Tenaga Nasional Bhd (TNB) should step up its contribution during the MCO by providing a 50% reduction in electricity bills for five months or at least 30% to help malls sustain their operations.

Under the stimulus package, TNB is giving a 15% discount for six months to six sectors –hotel operators, travel agencies, local airline offices, shopping malls, convention centres and theme parks.

There is also a six-month discount of 2% for all residential, commercial, industrial and specific agriculture sectors.

Currently, premises owned by government-linked companies (GLCs) are waiving or giving discounts on rents to SMEs.

Some GLCs that have provided rental reduction include Mara, Petronas, Permodalan Nasional Bhd, PLUS, UDA and several state-owned companies.

Retail design firm Visata Creative Sdn Bhd co-founder Timothy Liew said as the country exits the MCO only at the end of April, “I think a 30% reduction (in rent) may not be sufficient as almost half the month is without sales.”

“With the MCO extended, I think the mall should give a rental waiver because no business is being done. However, once retailers are back in business, perhaps the waiver can take this form — first month of MCO (full rental waiver), second to third month (50% rental waiver), fourth to fifth (30% rental waiver) and so on,” he told FocusM.

Liew said retail sales will be in slow recovery mode after the MCO as consumer sentiment would be affected. Also, some people would be facing reduced income and be wary of making purchases. 

“So how can retailers encourage consumer spending? Focus on promotions that drive value for customers. For example, give some freebies with every purchase made, etc.

“It’s most likely that people will not be too comfortable with going out after the MCO is lifted for fear of re-infection. However, I also believe the malls should look into some measures to promote physical distancing whether it is to limit the number of people in the mall at any one time and doing public announcements reminding people to be physically distant at all times.”

However, a real estate investment trust (REIT) official said landlords of commercial/industrial buildings cannot be compared to the government in terms of financial resources.. 

He said while the government has other sources of income, most landlords do not have other sources of income. 

“But some landlords, rents are their only income. So waiving rent for a period of three to six months is not a consideration. Giving a certain percentage of rebate especially to affected SMEs is possible but not extending free rent. It’s not even possible for landlords to maintain their buildings,” he shared. — April 14, 2020