It took the severely cash-strapped airline four years to find a partner in developing the land.
After years of being stuck with a white elephant, Jet Airways has decided to jointly develop its 2.5-acre plot at Bandra Kurla Complex (BKC) with Godrej Properties. DNA had reported about the probable deal on March 8.
The cash-strapped airline is learnt to have recently signed the term sheet (a document clarifying the initial terms of a possible deal between the buyer and seller) with the developer.
A formal agreement is yet to be signed as the two are still negotiating the compensation amount and the profit to be shared. As per information, Godrej has offered compensation of Rs450 crore and profit of up to 10%, but Jet is demanding Rs520 crore and 20% of the profit. Jet, however, has agreed to receive 2.5 lakh sq ft built-up space.
Jet had purchased the plot — located next to the Mumbai Cricket Club — in an auction by the Mumbai Metropolitan Region Development Authority (MMRDA) in 2006, but had been unable to develop it since.
Both sides, however, are yet to publicly confirm the deal. While Godrej Properties refused to comment, Prasun Sengupta, vice president (corporate administration) of Jet Airways, said the airline has not reached an understanding with Godrej. “We are still in talks with them,” said Sengupta.
The airline has taken the joint venture route, since, according to rules framed by MMRDA for BKC plots, the owner cannot sell the plot to a third party for five years after it has been developed. MMRDA rules also stipulate that Jet, which had bid for the plot in the end-user category, has to occupy at least 60% space of the built-up area, which comes to 2 lakh sq ft.
In view of the MMRDA rule, and the global FSI having been raised from 2 to 4, the area available for development works out to approximately 13 lakh sq ft. Hence, the airline had asked various developers to make offers comprising both monetary and built-area sharing options.
Sources said the airline is seeking the monetary component to pay off a loan of Rs400 crore it had taken from HDFC in 2006.
Real estate experts say that though technically the joint venture could be termed a sale, but for official purposes, the airline is free to enter into an agreement to develop the property with a third party. “But the land will remain in Jet’s name, a fact the new developer has to bear in mind,” said a consultant.
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