How to Structure a Revenue-Sharing Lease Deal for Indian Retail Spaces

Revenue-sharing leases — where the tenant pays a base rent plus a percentage of turnover above a defined threshold — have long been standard in organised retail real estate globally. In India, the model has gained significant traction over the past decade, particularly in premium malls and high-street retail, driven by the recognition that tenant success and landlord income are fundamentally linked.

The standard revenue-sharing structure in Indian retail leases comprises a minimum guaranteed rent (MGR) — typically set at 60–75% of the prevailing market rent — plus a percentage of turnover above a breakeven threshold. The turnover percentage varies by retail category: food and beverage operators typically pay 8–12% of turnover, fashion retailers 6–9%, electronics and large-format stores 3–5%, and luxury brands 3–6%. The breakeven threshold — the turnover level at which the revenue share kicks in — is calculated to ensure that the MGR is approximately equivalent to the revenue share at average performance, preventing the landlord from earning below market on above-average performers.

For retail tenants, the revenue-sharing model reduces occupancy cost risk during the critical establishment phase of a new store. A food and beverage operator launching in a new mall in Hyderabad — where footfall can take 12–18 months to stabilise — benefits from the lower MGR in early months rather than paying full market rent while building customer base.

For landlords and mall developers like Phoenix Mills, Prestige Retail, and DLF Shopping Malls, revenue-sharing leases provide upside participation in successful tenant performance — and create a powerful incentive to invest in mall management, marketing, and footfall generation that pure fixed-rent structures do not.

The most contested elements of revenue-sharing leases in India are the definition of "turnover" (whether online sales through click-and-collect or omnichannel operations are included), reporting and audit requirements (monthly turnover certificates, annual audited statements, and landlord audit rights), and the treatment of discounts, refunds, and loyalty programme redemptions. Getting these definitions right at the lease stage prevents costly disputes during the tenancy.