No takers for MMRDA’s prime BKC property

MUMBAI: A recent tender for a prime three-acre plot in Bandra-Kurla Complex floated by the Mumbai Metropolitan Region Development Authority (MMRDA), the special planning authority for the area, found no takers.

BKC, one of the leading business districts in the country, is the favourite hunting ground for the biggest developers; land here has always commanded a huge premium.

MMRDA says it withdrew the tender because some permissions were not in place, but builders claim it fixed a ridiculously high reserve price, which worked out to almost Rs 1,500 crore for the land parcel, making the project unprofitable. The highest price in BKC was paid by Mukesh Ambani’s Reliance a decade ago when it paid Rs 1,104 crore for 18.5 acres.

“The basic reasons for failure were bad market and too much expectation of price. With such high price, premiums, delays in permission, the purchaser would have lost money. By asking such high prices, how can affordability come in the market?” said a senior official of a construction firm. Early this month, TOI reported how MMRDA withdrew bids for sale of a 12,500 sq m plot after potential bidders expressed concern about the lack of clarity on rules and regulations.

MMRDA’s plan to push for residential components on plots in BKC also did not receive a formal approval as modification in the Maharashtra Regional Town Planning (MRTP) Act is yet to be carried out. The authority’s officials said bids will be re-invited at a later stage when these issues are resolved. Over the past decade, MMRDA has successfully conducted auctions of various land parcels at BKC and raised over Rs 4,000 crore for funding infrastructure projects.

The last successful auction was conducted in 2007-08. After almost 8 years, in March 2016, the authority again invited bids for the auction of a commercial plot at BKC. CBRE, the international property consultant, was appointed to provide guidance on the reserve price and conduct the auction. Till May, the authority failed to garner any response and the auction date was rescheduled for the second week of June. With still no bids, the authority decided to push it back to August 10 and provided the option for the winning bidder to utilize 30% of the development potential on the said plot for residential purposes.

But on August 9, MMRDA decided to withdraw the auction process. “The reserve price of nearly Rs 2,95,800 for 50,000 sq m permissible built up area (around Rs 1,500 crore) plus 200% of ready reckoner rate as additional FSI premium was a primary economic factor that dissuaded potential bidders,” said a developer.

“The reserve price itself translates the FSI cost to Rs 27,480 per square foot. Current pricing for BKC Grade A building hovers between 32,000 and 35,000 sq ft on saleable area, thereby leaving no room for surplus once interest costs and construction costs are factored in. The affordability for any developer or end-user is absent. This was one of the crucial reasons for a no-show by developers,” he added

Credits ET Realty

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