Startups seek rental waivers, invoke force majeure to survive, Technology News, ETtech

Startups seek rental waivers, invoke force majeure to survive
Several startups across the country are seeking rental waivers from their landlords and invoking ‘force majeure’ clause in their contract to overcome severe business loss due to the Covid-19.

Multiple startups have written to their landlords requesting a rent-free period ranging from one to three months and reduction in rents for the rest of the year, citing severe cash crunch and a ‘nil revenue’ scenario, industry insiders said.

“We occupy about 1,200 seats across the portfolio and partner offices in our campus, and are expecting a rent reduction of 25-30% in the long term, alongside a temporary waiver for the ongoing lockdown period,” said Harish Bahl, founder, Smile Group, a Gurgaon-based incubation and investment platform for internet businesses. Several startup firms said revisiting rental expense is critical for their survival.

“Since Covid-19 has been declared a ‘force majeure’ event and this clause is in most of our contracts, we are trying to invoke it,” said Swati Bhargava, cofounder of cashback and coupons site CashKaro. “Though the landlords at this point are not willing to oblige,” she said. CashKaro occupies 170 seats across Gurgaon and Chennai.

In case the landlords don’t waive rent, many startups will have to either raise funds fast, which looks difficult in the current environment, or have to take drastic measures to cut costs. Many startups have started laying off staff and some have initiated salary cuts to conserve cash.

“Complete shutdown of facility has led to business halt for my company and may lead to job losses for my employees,” said Shyam Visamsetty, managing director of cloud management firm Navtej. “The landlord is not willing to waive off rent too.”

Some entrepreneurs want the government to intervene.

Ashish Kashyap, founder of Gurgaon-based financial services app INDwealth, said some landlords have already agreed to rental waivers.

“I feel the others will come around, too, in due course, though having a compulsory mandate from the government would be really useful, as it will ensure all businesses can avail this waiver, instead of just a handful,” he said. INDwealth occupies 200 seats in Gurgaon alone.

Coworking space providers, too, hope that the government will come out with some sops for both the tenants and the workplace providers.

Indian Workspace Association, which represents 40 flexible operators that house a number of startups, feels the government has to support the new sector during these tough time. “We are liaising with the relevant ministries and authorities to get support and relief for the industry, which could eventually be passed on to our clients,” said Pranay Gupta, a member of IWA and cofounder of coworking space 91springboard.

The Indian coworking segment currently has more than 200 players operating across the country. The top seven players — namely, CoWrks, WeWork India, Awfis, Regus, Smartworks, 91springboard and Oyo’s Workspaces — manage more than 350 centres between them across multiple cities in the country.

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