Position Money (Salami) in Bangladesh Explained

Anyone who has tried to rent a shop in a busy Dhaka market, a new shopping complex in Chattogram or a roadside commercial building in a district town will have heard the word salami. Also called position money (or sometimes "pagri" in other parts of South Asia), it is a lump-sum payment made by an incoming shop tenant for the right to take a particular shop — separate from rent, and often separate from the advance. It can be a large amount, it is frequently paid in cash, and it is one of the least-documented and most-disputed parts of commercial renting in Bangladesh.

This guide explains position money (salami) in Bangladesh in plain English: what it is and why it exists, how it differs from advance rent and security deposits, the common forms it takes, what happens when a tenant leaves or transfers the shop, how the law and tax may treat it, a worked comparison with the arithmetic shown, and practical advice for both owners and traders. It is general information, not legal or tax advice.

What Is Salami (Position Money)?

Salami is a one-time payment made by a tenant to a landlord (or sometimes to an outgoing tenant) to secure the tenancy of a commercial space — typically a shop, stall or showroom. It is paid in addition to the monthly rent. In most arrangements it is non-refundable, or only partly refundable, and it is not adjusted against rent.

The name "position money" captures the idea: the tenant is paying for the position — a good location, footfall, visibility, and the goodwill of trading in a known market. In highly sought-after markets, the salami for a well-placed shop can be several times the annual rent, while a shop at the back of an upper floor may attract little or none.

For a short definition, see our glossary entry what is salami in shop rent.

Why Salami Exists

Salami grew out of market realities in Bangladesh and the wider region:

• Demand exceeds supply for good commercial positions, so owners can charge a premium upfront.
• Developers need capital to build new markets; collecting salami from shop allottees before or during construction helps finance the project.
• Long tenancies with modest rent. Historically, shop rents in older markets were often kept relatively low and rarely revised, so owners took value upfront through salami.
• Goodwill transfer. A shop that has traded successfully for years carries goodwill that an incoming trader wants to buy.

Salami vs Advance Rent vs Security Deposit

These three payments are often mixed up, and some agreements lump them together as "advance". They are different, and your paperwork should say which is which.

For a detailed look at the other two, read advance rent and security deposits in Bangladesh.

Common Forms of Salami Arrangements

1. Landlord salami on a new lease

The owner of a shop or market charges a new tenant a lump sum at the start of the lease. The tenant then pays monthly rent (often lower than it would otherwise be) for the agreed term.

2. Developer allotment in a new market

In new shopping complexes, "allottees" may pay a large salami in instalments during construction to secure a shop, then pay rent once the market opens. The line between buying a shop and paying salami can blur here, so read the documents very carefully: are you becoming an owner (with a registered deed) or a long-term tenant (with a lease)?

3. Tenant-to-tenant transfer (goodwill)

An existing tenant who wants to leave "sells" the tenancy to an incoming trader, who pays them salami for the position and goodwill. Whether this is allowed depends entirely on the lease and the landlord's consent. Many landlords insist on consent and take a share of the transfer salami, or charge a transfer fee.

4. Partly refundable salami

Some agreements provide that a part of the salami is refundable if the tenant leaves within a certain period, or reduces year by year. This is less common but fairer when the salami is very large relative to the lease term.

What the Law Says (In General Terms)

Salami sits in an awkward legal space. The Premises Rent Control Act, 1991 contains provisions about premiums, advance and deposits that may be relevant to salami-type payments, and the Act's approach and its interpretation by courts should be checked with a lawyer. In practice, salami is widely paid in commercial markets, but that does not mean every salami demand is lawful or enforceable in every situation.

Points to discuss with a lawyer before paying or charging a large salami:

• Whether the payment could be treated as a premium limited or restricted under the Premises Rent Control Act, 1991.
• How the payment should be documented — in the lease, a separate agreement, or a receipt — and whether stamp duty or registration applies under the Stamp Act 1899 and the Registration Act 1908 for your type of lease.
• What rights the tenant has if the landlord ends the lease early, or if the building is sold or redeveloped.
• Whether the tenant may transfer the shop and on what conditions.

We are not stating any specific rule, limit or section here. The law and practice on premiums are nuanced, and the right answer depends on your documents and circumstances.

Tax Treatment: Ask Before You Assume

For the landlord, salami is money received in connection with property, and it is likely to have income tax consequences under the Income Tax Act, 2023. How it is classified (for example as rental income, or otherwise), in which year it is taxed, and whether any VAT or withholding tax considerations apply under the VAT and Supplementary Duty Act, 2012, should be confirmed with a tax lawyer or the NBR. For the tenant's business, how the payment is treated in business accounts is also a question for their accountant.

What is certain is that undocumented cash salami creates problems later — in tax records, in family inheritance disputes, and in any court case about the tenancy. Our guide on house rent income tax in Bangladesh covers the general rental income picture.

Worked Example: Salami Plus Low Rent vs No Salami Plus Market Rent

For example (illustrative): An owner in a Dhaka market has a ground-floor shop. Two offers are on the table for a 5-year (60-month) lease:

• Offer A: Salami Tk 12,00,000 plus rent Tk 20,000 per month.
• Offer B: No salami, rent Tk 35,000 per month.

From the owner's point of view, Offer A brings in Tk 3,00,000 more over five years, plus the benefit of having Tk 12 lakh upfront. From the tenant's point of view, the salami is only "recovered" through lower rent after 80 months — more than the 60-month lease. That means Offer A makes sense for the tenant only if they expect to stay longer than 80 months (and the lease allows it), or if they can recover value by transferring the shop with salami later.

This simple comparison ignores inflation, rent reviews, interest on money and risk. It is not investment advice, but it shows why both sides should do the arithmetic before agreeing.

Advice for Shop Owners

• Put everything in writing. State the salami amount, whether it is refundable (fully, partly or not at all), and under what conditions.
• Give a receipt. A signed, dated receipt describing the payment as salami/position money for shop no. ____.
• Link it to the lease term. A very large non-refundable salami on a short lease is likely to be seen as unfair and can lead to disputes.
• Set transfer rules. Say clearly whether the tenant may transfer, whether your consent is needed, and whether a transfer fee applies.
• Keep rent reviews in the agreement. A salami-plus-low-rent deal with no rent review can leave you locked into very low rent for many years.
• Get legal and tax advice for large amounts, and keep the money properly recorded.

Advice for Traders and Tenants

• Know what you are buying. Is it a registered shop ownership, a long lease, or just a tenancy? The documents decide.
• Check the landlord's title. Make sure the person taking salami actually has the right to let the shop (ownership documents, power of attorney if an agent).
• Insist on a written lease with a term. A large salami without a secure term is a big risk.
• Ask about refunds and transfer. What happens if the market is redeveloped, if you need to leave early, or if you want to sell the position?
• Pay through traceable channels and get receipts.
• Do the break-even calculation shown above before comparing offers.

A Sample Salami Receipt

Whatever the amount, a clear receipt protects both sides. Adapt this illustrative wording and have it checked for large sums:

RECEIPT — POSITION MONEY (SALAMI)

Received from [Tenant's name], proprietor of [Trade name], NID no. [____], the sum of Tk [amount] (in words: [____]) by [bank transfer / cheque no. ____ / cash] on [date], as position money (salami) for Shop No. [____], [Floor], [Market name], [Address].

This payment is [non-refundable / refundable as follows: ____] and is not adjusted against monthly rent. It is subject to the lease agreement dated [date] for a term of [__] years. Monthly rent is Tk [____]; advance rent of Tk [____] and security deposit of Tk [____] are recorded separately.

Landlord: [Name], Signature ________ | Tenant: [Name], Signature ________ | Witness: [Name], Signature ________

Questions to ask before paying salami in a new development

• Does the developer have approved plans and clear title to the land, including any land-sharing agreement with the landowner?
• Is the payment for ownership of the shop or for a tenancy? If ownership, when will the deed be registered?
• What is the expected handover date, and what happens if construction is delayed?
• Will service charge be separate, and who will manage the market after handover?
• Is any part of the payment refundable if the project is cancelled?

Transferring a Shop With Salami

When a tenant wants to leave and pass the shop to another trader, disputes often arise between three parties: the landlord, the outgoing tenant and the incoming tenant. A clean transfer usually involves:

1. The outgoing tenant asking for the landlord's written consent, as required by the lease.
2. Agreement on any transfer fee or share of salami to the landlord, if the lease provides for it.
3. Clearance of all dues — rent, service charge, electricity — by the outgoing tenant.
4. A new lease (or a tripartite transfer agreement) signed with the incoming tenant.
5. Settlement of the outgoing tenant's security deposit and any unadjusted advance.
6. Updating the market's shop register and trade licence details.

Common Mistakes

• Cash without receipts. The single biggest cause of salami disputes.
• Calling everything "advance". Later, the tenant claims it was refundable advance; the owner says it was salami.
• No lease term. The tenant pays a large sum and has no security of tenure on paper.
• Ignoring the landlord's consent for transfers. Private deals between tenants can be challenged by the owner.
• Locking in very low rent forever. Owners who take salami but omit rent reviews may regret it for decades.
• Not planning for redevelopment. If the old market is demolished, what happens to tenants who paid salami? Agreements should address it.

Final Thoughts

Salami is a long-established feature of commercial renting in Bangladesh, but it works fairly only when both sides understand exactly what is being paid for, how it relates to rent and term, and what happens at the end. Write it down, give receipts, keep it separate from advance and deposits, and get legal and tax advice for large sums.

For market owners managing many shops, keeping each shop's salami record, advance balance, deposit, rent and agreement together avoids confusion when leases end or shops change hands. Bariwala ERP (বাড়িওয়ালা ERP) stores agreements against each shop, tracks advance payments and adjustments, issues rent receipts and keeps due lists and income records in one place.