What Is Salami in Shop Rent? Meaning and Example

Anyone who has tried to rent a shop in a busy Bangladeshi market, from a New Market lane in Dhaka to a bazaar in a district town, has probably heard the word salami. The monthly rent may be modest, but before you get the keys, the owner or the outgoing shopkeeper asks for a large one-time payment, sometimes many times the yearly rent. Understanding what salami in shop rent means, how it differs from an advance or security deposit, and what risks it carries is essential for both shop owners and traders.

This glossary article explains the meaning of salami (also called position money or pagri in some places), how it works in practice, how it is calculated and negotiated, how it compares with other payments, the legal points to be careful about, and how to document it properly. It is general information, not legal or financial advice.

What Is Salami? (Meaning)

Salami (sometimes written selami) in the context of shop rent is a one-time, lump-sum payment made by an incoming tenant to secure the right to occupy a commercial space, usually a shop in a market, shopping complex or busy street. It is paid on top of the regular monthly rent and is often called position money, because it reflects the value of the shop's position: its location, footfall and trading potential.

In everyday use, salami is paid either:

• To the landlord or developer, when a new shop is first let or when the landlord re-lets a vacant shop; or
• To the outgoing tenant, when an existing trader hands over their shop and "position" to a new trader, sometimes with the landlord's consent and sometimes with a share going to the landlord.

Unlike a security deposit, salami is often not refundable, or is only partly refundable, depending on the agreement. This single point is where most misunderstandings and disputes arise.

Why Salami Exists

Salami is a market practice that grew out of high demand for well-located commercial space and relatively low monthly rents. Several factors contribute:

• Location value: a corner shop on a main road or near a market entrance can generate much more business than one tucked away inside.
• Long-term occupancy: traders often stay in the same shop for many years, and rent increases may be limited or slow, so the owner seeks value upfront.
• Construction financing: developers of new markets and shopping complexes have sometimes used salami or position money from future traders to help fund construction.
• Goodwill transfer: an established trader leaving a shop may expect payment for the customer base and position they built up.

Salami vs Advance vs Security Deposit vs Rent

For more on how advance and security deposits should be handled, see our guide to advance rent and security deposits in Bangladesh.

How Salami Works: A Worked Example

For example (illustrative): A trader wants a ground-floor shop of 150 sq ft in a busy market. The owner quotes:

• Salami: Tk 1,500,000 (one-time)
• Monthly rent: Tk 15,000
• Security deposit: 3 months' rent = 3 x 15,000 = Tk 45,000
• Agreement term: 10 years

Total paid on day one: 1,500,000 + 45,000 + first month's rent 15,000 = Tk 1,560,000.

To understand the true cost, the trader spreads the salami across the agreement term:

• Salami per year: 1,500,000 / 10 = Tk 150,000
• Salami per month: 150,000 / 12 = Tk 12,500
• Effective monthly occupancy cost: rent 15,000 + salami share 12,500 = Tk 27,500

So although the monthly rent looks like Tk 15,000, the effective cost is closer to Tk 27,500 a month over ten years, before counting what the Tk 1,500,000 could have earned if invested elsewhere. If the trader had to leave after 4 years without any refund, the salami per month of actual use would be 1,500,000 / 48 = Tk 31,250, taking the effective cost to Tk 46,250 per month.

Key lesson: Always calculate salami over the realistic period you will stay, not the best-case period. The shorter your stay, the more expensive the salami becomes.

Types of Salami Arrangements

Non-refundable salami

The payment is kept entirely by the recipient. The trader gains the right to occupy for the agreed term but gets nothing back when leaving, unless they can pass the position to another trader.

Partly refundable or depreciating salami

The agreement may say that a portion is returned if the tenant leaves early, reducing year by year. For example, 10% of the salami is treated as used each year, so after 4 years, 60% would be refundable. This is fairer to traders but must be written down clearly.

Transferable position

The trader may transfer the shop to another trader who pays a new salami. The landlord may require consent, a transfer fee, or a new agreement. Without clarity, disputes between the landlord, outgoing trader and incoming trader are common.

Salami in new shopping complexes

In some developments, traders pay position money in instalments during construction. This carries extra risk: construction delays, changes in the shop's position or size, and uncertainty about ownership versus tenancy rights. Read the documents very carefully and take legal advice.

How the Salami Amount Is Negotiated

There is no official rate or formula for salami. It is set by negotiation, and the amount depends on several factors:

• Position within the market: ground floor, corner, main entrance and main aisle shops command the most.
• Footfall and trade type: a market known for a particular trade (clothes, electronics, gold, medicine) raises the value of shops suited to that trade.
• Monthly rent level: a lower monthly rent often means a higher salami, and vice versa. The two should be negotiated together.
• Agreement term and security: a long, registered term with clear renewal rights is worth more to a trader than an uncertain arrangement.
• Refund terms: a trader will reasonably pay more if part of the salami is refundable on exit.
• Condition of the building: ageing structures, fire safety concerns or redevelopment risk reduce what a careful trader will pay.

For example (illustrative), a depreciating refund: The agreement says the Tk 1,500,000 salami is treated as used at 10% per year over 10 years. If the trader leaves after 4 years, the used portion is 4 x 10% = 40%, or Tk 600,000, and the refundable portion is 1,500,000 minus 600,000 = Tk 900,000. With this clause, the trader's cost for 4 years is Tk 600,000, or 600,000 / 48 = Tk 12,500 per month, the same as spreading it over the full term. This is why refund terms matter so much in negotiation.

Legal Points to Be Careful About

The Premises Rent Control Act 1991 (Bari Bhara Niyontron Ain) contains provisions on advance payments and on payments demanded in addition to rent, and terms such as premium or salami are relevant to those provisions. How the law applies to a particular shop, market or type of arrangement, and how courts treat such payments, is a question for a qualified lawyer. Do not assume that because salami is common, every arrangement is automatically enforceable or lawful.

Other points to consider:

• Stamp duty and registration: longer commercial agreements and those involving large sums may require proper stamping and registration under the Stamp Act 1899 and the Registration Act 1908. Unregistered documents may carry less weight in a dispute.
• Tax: for the recipient, salami may have income tax implications under the Income Tax Act 2023. For the payer, its treatment in business accounts may differ from rent. Discuss with a tax adviser.
• Ownership vs tenancy: paying salami does not make the trader an owner of the shop. It usually buys a right to occupy under the terms agreed.
• Market committee rules: some markets have their own rules on transfers and position money; ask for them in writing.

Disclaimer: this is general information, not legal or tax advice. Laws and their interpretation can change.

How to Document a Salami Payment

A large amount paid on trust, with only a handwritten slip or no receipt at all, is a recipe for future conflict. Whether you are receiving or paying salami, make sure the written agreement covers:

1. The names, NIDs and addresses of all parties (landlord, tenant and outgoing tenant, if any).
2. The exact shop: floor, number, size and location in the market.
3. The salami amount, how it was paid (bank transfer, cheque, pay order), and the date.
4. Whether it is refundable, partly refundable or non-refundable, and on what schedule.
5. The agreement term and renewal terms.
6. Monthly rent, escalation and service charge.
7. Rules on transfer of the shop to another trader, and any transfer fee.
8. What happens if the building is redeveloped, demolished or acquired.
9. Signatures of all parties and witnesses; proper stamping and registration as advised by a lawyer.

Pay large sums through a bank, not in cash, so there is an independent record.

Tips for Traders Paying Salami

• Verify ownership: check the owner's title documents, and for new complexes, the developer's approvals.
• Calculate the effective monthly cost over a realistic stay.
• Negotiate a depreciating refund clause if you might leave early.
• Clarify transfer rights before paying.
• Never pay the full amount without a signed, stamped agreement.
• Ask the market committee about any history of disputes with the shop.

Tips for Landlords Receiving Salami

• Be transparent: explain exactly what the salami covers and whether any part is refundable.
• Issue a proper receipt and keep bank records.
• Do not demand salami in ways that conflict with the law; take legal advice on how to structure the arrangement.
• Consider whether a reasonable market rent with escalation and a normal security deposit would be simpler and create fewer long-term disputes.
• Keep the agreement, receipts and any transfer consents safely, as disputes can arise many years later.

Some landlords now prefer to attract tenants with modest concessions instead of large upfront payments, for example a limited fit-out period. See our guide to rent-free periods in commercial leases for that approach.

Common Mistakes with Salami

• Assuming salami is refundable when the agreement says nothing.
• Paying an outgoing trader without the landlord's written consent to the transfer.
• Paying in cash with no receipt.
• Unstamped or unregistered agreements for large, long-term arrangements.
• Comparing shops only by monthly rent and ignoring the salami's effective monthly cost.
• Paying position money for a shop in an unfinished complex without verifying approvals and ownership.

Related Terms

• Position money: another name for salami, emphasising the value of the shop's location.
• Pagri: a similar concept used in parts of South Asia.
• Advance rent: rent paid ahead, adjusted against future months.
• Security deposit (jamanat): refundable protection for the landlord.
• Goodwill: the value of an established business's customer base and reputation.
• Effective rent: the total cost of occupancy spread over the months of use.

For a deeper explanation of how position money works across markets and malls, read our guide to position money and salami explained, and for the wider picture, our shop rent guide for Bangladesh.

Final Thoughts

Salami is a long-standing part of shop rent in Bangladesh, but it is also one of the most misunderstood. At its simplest, it is a one-time payment for the right to occupy a valuable position, separate from rent, advance and security deposit. Whether you are paying or receiving it, calculate the effective monthly cost, write down refund and transfer terms, pay through a bank, and take legal advice on the agreement.

For market and mall owners, keeping every shop's salami, deposit, rent and agreement dates in one record avoids confusion years later. Bariwala ERP (বাড়িওয়ালা ERP) lets you record agreements and advance payments for each shop, generate monthly rent and service charge invoices, and track dues across a whole market.