Moving to

I'm moving to Mostly.

I plan to use that site as a "self-marketing website" of sorts and to manage content in a way that I would otherwise not be able to do on blogger alone.

This blog will stay, ostensibly for more provisional ideas prior to refinement. I'll be gradually moving content (I still like) over to the other website. =)

Wednesday, May 2, 2012

A "New" Paradigm for Rental

Much has been said about how ballooning rentals for business premises strangles businesses and curtails real economic growth. We could ask for lower rentals, but should rentals be lowered, spaces would then be under-priced and business owners would reap windfalls instead, leading to disgruntled landlords.

I'd like to briefly talk about a "new" paradigm for rental. The prohibition against usury in Islam has led to the creation of a set of investment principles called "Islamic banking". In Islamic banking, the lender also takes equity in the venture that money is being loaned out for. In modern parlance, we might say that borrower and lender are now "in it together", and the lender now has the incentive to provide support to the borrower to help the borrower to succeed.

Rentals can be formulated in a similar way. Rentals to be paid might be a ("low") flat rental rate with additional profit sharing. That way tenants need not fear poor business as the rental to be paid corresponds to how much revenue is collected. In addition, the owner of a building becomes more responsive to the needs of tenants and does not have to wait till the tenant's tenure is over to jack up rents.

How profit sharing takes place is an important detail. One possibility is for payment support to be provided by the landlord (credit card accounts, cash registers, etc.) and revenues to be recorded. This is not at all onerous for the owner of a building, and can make for stronger bargaining power with banks for the terms of payment services. (Ok, I'm aware that even the aggregation of all Capitaland malls is unlikely to make Visa or Mastercard budge.) Paranoid landlords can also have cameras installed watching the cash boxes to record possible cheating on the part of tenants. In any event, financial risk is reduced for both tenant and landlord (though admittedly more for the tenant). Furthermore, under such a system, landlords might obtain valuable information about consumption patterns that will certainly come in handy when, say, determining the tenant mix of a new mall.

On a more philosophical note, it may be time for the rentier capitalist economy of Singapore to transform into one where renter and borrower are in it together.

(Those familiar with the econo-operations management literature, might see this as a form of supply chain coordination that seeks to ameliorate the effects of "double marginalization" that leads to supply chain inefficiency.)

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