New Delhi: Indian Railways’ plan to develop a 15ha plot in central New Delhi has attracted a lot of interest, with at least 30 developers attending a pre-bid meeting on 23 January.
“Thirty-six major developers registered for the event. Thirty major firms, including DLF (Ltd), Parsvnath Developers Ltd and the Mantri Group, have attended,” said P.D. Sharma, member, projects, Rail Land Development Authority (RLDA).
Initial bids for the project were called earlier this month. They are scheduled to be opened on 4 February.
Buoyed by improved conditions in the real estate sector, RLDA, which was set up in 2007 to commercially develop surplus railway land, is readying Rs4,000 crore worth of sites for award this year, Sharma said.
RLDA had been criticized in recent times for its inability to get property tenders off the ground. The global financial meltdown as well as what the industry saw as punishing bid criteria affected the authority’s plans—as Mint reported in April last year—leading to railway minister Mamata Banerjee remarking in her 2009 budget that “revenues expected from commercial utilization of surplus railway lands also did not materialize”. Only two plots—in Gwalior, Madhya Pradesh, and Bangalore—have been bid out so far.
Graphic: Ahmed Raza Khan/Mint
This is not the first time the Sarai Rohilla project in central New Delhi is being bid out. The last time tenders were invited to develop the plot in 2007, the selected developer was unable to fulfil commitments. This led to RLDA cancelling the bid and retaining Rs10 crore deposited as bid security, Sharma said. Mint could not immediately ascertain the name of the developer.
For developers such as Sunil Mantri Realty Ltd, the bid is an opportunity to gain a foothold in the National Capital Region as it seeks to expand its footprint into the north.
“We are looking at the plot for two reasons: one, it’s a railway property, so there will be a clear title. Secondly, it will help us in expanding our presence in the national capital,” said founder Sunil Mantri.
While details on pricing haven’t yet been worked out, Mantri said that his group will look to capitalize on the project by going in for large-scale commercial development.
“The residential component will be very small compared to the commercial element,” Mantri said.
Of the land parcel, 4.5ha is already built up with staff quarters and service buildings, which have to be redeveloped by the winning bidder according to conditions laid down by RLDA.
Further, while 71% of the plot will be for new residential accommodation, totalling 2.3 million sq. ft, only 10% of the land—approximately 330,000 sq. ft—has been reserved for commercial development, while 91,564 sq. ft will be used for amenities.
According to Jones Lang LaSalle Meghraj, one of the consultants empanelled by RLDA, the winning bid in the last auction was for Rs1,076 crore. This time, though, RLDA is looking to keep valuations attractive for the developers, many of whom are just staggering out from the slowdown.
“While they haven’t yet finalized the reserve price for the auction this time, the RLDA has increased the FAR (floor-area ratio) from 1.67 earlier to two,” said Santhosh Kumar, chief executive officer, operations, Jones Lang LaSalle Meghraj.
The pre-bid meeting also discussed on how to cancel the earlier bid and the payment schedule for the current bid.
Given the jinxed history of the plot, industry watchers believe the process may be easier this time around. “From the railways point of view, there should be enough experience to realize what developers want because there is a capital crunch,” said Anshuman Magazine, chairman and managing director, South Asia, CB Richard Ellis, a realty consultancy. “But certainly, it’s a good time to put it in the market as there is more interest now compared to last year.”
The authority is also considering changing some of the bid criteria, such as huge upfront payments, based on bidders’ suggestions, Sharma said.
“Last time, we had charged as much as Rs1,000 crore in upfront payments. This time it is being staggered,” Sharma said. “We expect to get some Rs700-800 crore this year because we are staggering the payments.”
Madhurima Nandy contributed to this story.