HDFC bank pays 20% less rent to the landlord due to pandemic lockdown.

Recently, the owner who leased his four-story building at the Regional Office of the HDFC Bank in Indore paid a 20% lower rent from the HDFC Bank. The landlord had no choice but to accept this since he could not know whether he could get another customer to occupy all four floors of the building.

HDFC Bank wrote a letter to landlords, where it utilizes branches and other offices, demanding a 20% rent cut, else exhibiting incapacity to occupy the premises further, says the industry sources. The bank spent Rs 1,658.47 crore on rent, electricity and local taxes between 2019-20. This is Rs 176.37 crore more than last year. In the entire country, HDFC Bank operates 5,416 branches and 14,901 ATMs.

 A banking analyst who didn’t want to be identified said: ‘Usually for the banks, after the expenses for employee salaries, other benefits and IT facilities, the third-largest expenditure is through rents.’ An Analyst said that HDFC Bank is not the only bank trying to reduce rent due to the pandemic and lockdown. ICICI Bank has also recently written to landlords demanding rent reduction during this lockdown. ICICI Bank comprises some 5,300 branches and 15,000 ATMs across the country, with Rs 1,200 crore spent on rent in the financial year 2019-20, electricity and taxes.

From the land owner’s perspective, banks are good long-term tenants who lease properties for 10, 15 or 20 years and have stable cash flows. The alternative is retailers, a division that has been severely affected by the pandemic lockdowns.