BW Communities

High Rise Price

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Two separate auctions rocked the Indian realty market this week. While three plots in the Bandra-Kurla Complex (BKC) attracted record-making bids, an auction conducted by the Bombay High Court of PAL-Peugeot land in the distant suburb of Kalyan-Dombivili, was called off. Different stories, different locations, but scenes from the same drama. The who’s who of the construction industry competed for the prime BKC plots. The largest of them, a 30,550 square metres (approximately 7 acres) plot, earmarked for a multi-storey parking and a commercial complex was bagged by Reliance Industries (RIL) for Rs 918 crore (Rs 28,000 a sq. ft). The other two — a 28,300 sq. m plot and one of 16,500 sq. m were picked up by the TCG Infrastructure-Hiranandanis combine for Rs 1,041 crore (Rs 34,300 a sq. ft) and Wadhwa Developers at Rs 831 crore (Rs 47,100 a sq. ft), respectively. With BKC surpassing Nariman Point and emerging as the most important business district in the country, prices in the complex have galloped faster than the national average for commercial property. In January 2006, TCG Infrastructure had bagged a 3,000 sq. m plot at Rs 14,300 a sq. ft. Today, the neighbouring plot successfully bid for by Wadhwa has fetched more than three times the rate. Similarly, Reliance Industries created waves in February last year when it bagged an 18-acre BKC plot for Rs 1,014 crore for a convention centre (Rs 18,000 a sq. ft). In this round, the Mumbai Metropolitan Region Development Authority, which administers the BKC, fixed its base price of Rs 1,000 crore for the three plots on a rate commanded by the Reliance convention centre plot and has ended up collecting Rs 2,790 crore. At these rates, the builders committing such huge investments should be rattled. But the confidence of cashing out at levels of Rs 65,000-70,000 per sq. ft two years hence keeps them cheery. Vijay Wadhwa, chief promoter of the Wadhwa Group, says he has already booked orders at those rates. “There are hundreds of banks and business groups streaming in from overseas who want quality ‘A’ grade office space and can’t get it,” says Wadhwa. “ICICI bank has already rung me up for 100,000 sq. ft.” How long will this price spiral continue? “Till there is demand, we will get the clients.” A day after the BKC bids opened, 178 acres of the now shut PAL-Peugeot plant came up for auction. Bidding was expected around Rs 700 crore, but the auction had to be put off after the Bombay High Court revealed that the property was encumbered with Rs 364 crore in liabilities, including workers’ dues and unsecured creditors. Related Stories Click here for all stories on Infrastructure A nightmare for big property investors. Well-located properties with clear titles, especially in the metros, are hard to come by. In the case of the PAL- Peugeot property, the liabilities were revealed in time. In many cases, foreign investors have lost millions by acquiring ‘unclean’ properties. No surprises, therefore, that when closed textile mills or a BKC plot go under the hammer, the competition is severe. Short supply translates into spiralling prices. “I have a long queue of foreign investors who find it difficult to locate properties that pass rigorous international norms,” says Pranay Vakil, chairman of Knight Frank Property Services. Given the tangle of property disputes and archaic and complicated property laws, it is unlikely that the situation will improve in the near future. (Businessworld Issue 04-10 Dec 2007)