Bangalore: A global liquidity crunch that has roiled credit and equity markets in the last two weeks has prompted bidders, both international and local, to request for concessions to build the Rs15,000 crore Dharavi slum redevelopment project in Mumbai.
In a pre-bid meeting on Friday, bidders requested the Dharavi Development Authority to provide some exemptions in the payments to be made during the bidding process owing to the difficulties that the real estate and banking industry are passing through.
At the bidding stage, each of the 19 chosen consortia is required to pay upfront 10% of the project cost as premium through a bank draft with another 10% being paid as performance guarantee.
“All the bidders requested us to exempt them from paying up the 10% project cost due to the financial crisis that most of the sector is reeling under. They have also asked for the payment of the premium through bank guarantee, instead of a demand draft, ” said Gautam Chatterjee, chief executive officer of Dharavi Development Authority.
Chatterjee said the authority is considering the requests and admits that the circumstances under which the bidding format was charted in 2007 have drastically changed during the present year. With delays, the project cost has shot up from Rs9,250 crore to Rs15,000 crore which makes 10% performance guarantee amount to Rs1,500 crore for the entire project.
According to the master plan, five different consortia will redevelop Dharavi, which will be divided into five sectors for its makeover. They will have to relocate the slumdwellers in buildings free of cost and then build commercial structures which can be sold at market prices.
The 19 consortia currently in the running have three companies in each team. A number of leading international and local players have bid for the Dharavi makeover project including Dubai-based Limitless, DLF Ltd, Housing Development and Infrastructure Ltd with Lehman Brothers Real Estate Partners as financial partner, Magarpatta Township Development & Construction Co., Mukesh Ambani’s Reliance Engineering Associates Pvt. Ltd, Larsen and Toubro Ltd, Indiabulls Real Estate Ltd and Emaar MGF Land Ltd.
Several of the bidders have become jittery because of the increased project cost and the growing difficulty in raising funds. “We have got a financial partner in place, but with the worsening credit crunch, no one feels it’s the right time to raise credit,” said a Mumbai-based developer and a bidder in the project, requesting anonymity.
After considering the requests of the developers, the authority will have another meeting with the bidders next week after which, in six weeks’ time, individual teams have to submit the development masterplan for each sector.