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Record Real Estate Deal in Mumbai
Monday, May 31, 2010

It’s called the biggest land deal in Mumbai. A plot of 25,000 sq metres, with a built-up area of 4,95,000 sq metres was bagged by Lodha Crown for a whopping Rs 4,053 crore, coming to Rs 81,818 per sq m. The auction was held for the built up area on Tuesday. The Lodha group quoted more than double the reserve price of Rs 1,980 crore set by MMRDA — the owner of the plot — which will now be leased to the group for 65 years.

After MMRDA did not receive any bids for the same plot last month, it reduced the reserve price from Rs 50,000 per sq m to Rs 40,000, also staggering the payment schedule over five years. This generated interest from 14 developers who had collected the bid document. Only four had submitted bids. The second closest bid was by Sunteck India at Rs 3,465 crore, followed by Indiabulls Real Estate at Rs 3,327 crore, while Gaurhari Estate quoted Rs 2,251 crore.

Said SVR Srinivas, additional metropolitan commissioner, MMRDA, “It has been a great deal for us and will go a long way in the over-all development of the region. It also indicates that markets are bouncing back and could set the tone for other auctions.” Initially the plot was meant for a 101-storey high-rise labeled Iconic Tower. Later MMRDA reduced this to about 80 floors. However, altering few other conditions like allowing only-residential development and multiple towers to attract bidders has meant virtually falling out of the tallest building race.

Said Abhisheck Lodha, managing director, Lodha Group, “Though our tower will be 60-70 storeys high, it is not about racing for the tallest building. It’s about creating good development. We’ll get to sell about 75 lakh sq ft, which is the single largest development in the city, giving us a great opportunity. 70 per cent of our development will be residential.”

Real estate experts call it the biggest deal in the city till date, on basis of the sheer ticket-size. But they are not convinced about the economics of the deal. “There are at least 2,500 apartments in the vicinity of Wadala in various stages of development. This will put downward pressure on the prices,” said Gulam Zia, national director (Research and Advisory Services), Knight Frank, India. He added, “The winning bidder has paid around Rs 9-10,000 per sq ft. Since the location itself in the current situation is not commanding high rates, the flats may end up getting over-priced around Rs 20,000 per sq ft. Maintaining a rate of around Rs 14-15,000 per sq ft will bring profit margins under pressure.”

This is the first successful auction MMRDA has carried out after 2008. It’s attempt at raising a minimum of Rs 435 crore by auctioning a plot with 14,500 sq metre built area in BKC three months ago found no takers. After this deal, sources say MMRDA, which was considering exploring different financial models for its other land parcels, could now get back to the leasing model, indicating the possibility of more big-ticket deals in the city.

 

 

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