Mumbai’s Fails to Lure Bidders in Govt Land Sale

Mumbai's failure to lure any bidders in the first government land sale in at least 1 1/2 years may cause rates in that area to fall as India’s financial hub seeks to develop the reclaimed marshland into a key business district. “It’s a once-in-10 years kind of situation,” Vivek Dahiya, chief executive officer of New Delhi-based GenReal Property Advisors, said by phone from New Delhi. “The Mumbai real estate market is going through a rare situation, where several micro- markets are going to witness over-supply because lots of projects coming up in some areas and demand drying up in some.”

The five likely bidders who attended a preliminary meeting last month for the sale of the site in the city’s Bandra-Kurla Complex didn’t submit offers yesterday, said Dilip Kawathkar, joint project director and spokesman for the Mumbai Metropolitan Region Development Authority. The land was valued at a minimum 4.35 billion rupees ($95 million) by the agency.

The failed auction may force Mumbai, whose commercial space makes it among the world’s five most expensive cities, to cancel or defer sales of land. The government offered the property at 2008 rates even after rents fell by more than a third in Bandra- Kurla, where London-based Standard Chartered Plc and Reliance Industries Ltd., India’s most valuable company, plan to shift their offices. “The land price seemed to be on the higher side,” Pujit Aggarwal, chief executive officer and managing director of developer Orbit Corp., said by telephone yesterday. Orbit was one of the companies that had attended the pre-bid meeting last month. “It would have been tough to make money.”

Rents in the Bandra-Kurla area had dropped 36 percent by December from a June 2008 high, according to data from CB Richard Ellis. The 3,162.5 square meters (34,040 square feet) of land that was to be sold yesterday in the north-central region of the city can be used to build as much as 14,500 square meters of office space, according to the government agency. The reserve price of 300,000 rupees a square meter set by the agency was unchanged from similar sales two years ago. “The failed land sale could impact sentiment and could lead to softening of rates in the Bandra-Kurla Complex,” GenReal Property’s Dahiya said. Mumbai is home to the nation’s central bank, two main stock exchanges, and the main trading centers for diamonds, bullion, commodities, bonds and currency, as well as the world’s most prolific movie industry. Overseas firms including Citigroup Inc. and Goldman Sachs Group Inc. have located their India headquarters in Mumbai.

The government had in March 2008 failed to sell all the available plots for the first time since 1995 as slumping global markets deterred buyers. About 20,000 square meters of land is still available for sale at the Bandra-Kurla Complex area, MMRDA’s Kawathkar said. “The authority will decide on a new model and one of the options is to construct buildings and lease out offices,” Kawathkar said yesterday. “The price is not high.” Mumbai-based Housing Development & Infrastructure Ltd., Vineeta Wadhwa, and Oberoi Builders were among those that had indicated their interest at a preliminary meeting on Feb. 11, Kawathkar said.