The property market crash has foiled the plot for the Mumbai Metropolitan Region Development Authority (MMRDA).
The property market crash has foiled the plot for the Mumbai Metropolitan Region Development Authority (MMRDA), which relies on selling the land in its possession at market rates to fund infrastructure projects.
Worried that the trend will continue, the authority is toying with a new revenue stream — of leasing the land, at a fraction of the sale price. The authority will get the land back after the lease expires, by when, hopefully, the market would have recovered.
On the top of its list is the 370-hectare planned office space at Bandra Kurla Complex, for which the authority is planning to invite lease bids in the next few months. The successful bidder would be the one who either quotes the highest rental irrespective of market fluctuation, or a rent which increases over a period of time.
Alternatively, the authority may ask interested firms to quote both the rent and the number of years for which they want to lease. Since the idea is to get higher rental, the authority may also decide to become a stakeholder in the new building.
In both the options, the successful bidder will construct the building at his own cost, and will hand it over to the authority after the lease expires. SVR Srinivas, additional metropolitan commissioner, confirmed the idea but refused to elaborate stating the authority is still working out the modalities.
MMRDA officials say the idea came about when the impact of the global economic crisis on the commercial space market in the country became evident — firms halted expansion plans, and office rents plummeted by almost 40%. That coupled with the poor response the authority received for the auction of its BKC plots made it realise that this is not the right time to sell its assets.
Real estate consultants back MMRDA’s move. “Compared to last year, the market has only slightly regained confidence. Rentals in BKC are currently in the range of Rs270 per sq ft to Rs300 a sq ft. We will have to see what incentives the new MMRDA proposal offers,” said Ambar Maheshwari, director (investment advisory), DTZ, a global real estate advisor.
According to an estimate, over 1 million sq ft of office space is expected to be added in BKC this year.
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